More layoffs coming to Best Buy after two years of declining sales that continued into holidays

While Best Buy executives see the consumer electronics market beginning to stabilize after two years of sliding sales, it won’t be soon enough to avoid more pain, including layoffs in the coming months.

After reporting its ninth consecutive quarterly sales decline, the Richfield-based retailer said Thursday it has launched a “restructuring initiative” that will include an undisclosed number of staff cuts, mostly in the first half of this year.

“These actions are never easy,” CEO Corie Barry told reporters on a media call.

She said the reductions will be across the enterprise, as the company looks to offset inflationary pressures, invest in strategic areas such as artificial intelligence and “right-size” parts of the business that are seeing lower volumes than expected a few years ago.

More details will be shared as the year goes on, Barry said.

The moves will give Best Buy “space to reinvest into our future and make sure we feel like we are really well-positioned for the industry to start to rebound,” she said.

In the first two years of the pandemic, Best Buy initially benefited from a big surge in demand for consumer electronics as people spent more work and leisure time at home. Since then, sales have tapered off as consumers have shifted more of their spending to vacations, eating out and concerts as well as to basics such as food as inflation has cut into their budgets.

On top of that, there has not been much innovation in consumer electronics since the pandemic to help jump-start sales.

Best Buy executives hope to see an upgrade cycle begin to kick in later this year as consumers replace items they bought early in the pandemic. Barry said they are seeing early signs of such a cycle starting with laptops, which saw a small uptick in sales in the fourth quarter.

“That to me feels like an early indicator of at least some foray into that replacement cycle because honestly really right now there isn’t any massive current innovation that would spur you to go buy a new laptop,” she said. “There’s a little bit, but we’re expecting more as the year goes on.”

Computing is the only product category where Best Buy expects to see positive sales growth this year.

Barry said she expects to see the consumer electronics sales slide start to level off this year, with hopefully sales growth in the years that follow. Best Buy has forecast comparable sales to be flat to down 3% this year, which would be an improvement, with more positive sales trends as the year goes on.

While the macro-environment continues to be uneven, Barry pointed to some other promising signs. Inflation is easing, which likely will contribute to lower interest rates. In addition, unemployment remains low.

Barry added she’s seeing some innovation and interest in other products such as in 98-inch-screen TVs, Bose open-ear headphones and Ray-Ban smart glasses, and hopes more is coming down the pike.

“The level of exciting and cool new tech at the Consumer Electronics Show in January felt back to normal,” she said. “Of course some of that cool new tech hits the market over the following year while some of it is still a few years from consumer launch.”

Neil Saunders, managing director of GlobalData, acknowledged consumer electronics has been on a downward cycle especially as consumers “shun big-ticket purchases because of pressures on their finances.” Still, he said Best Buy has not done enough to drive growth.

He noted that Best Buy’s fourth quarter revenue was 3.6% lower than it was during the same period in 2019, and that was with the benefit of an extra week.

“Worryingly, Best Buy hasn’t just given up the gains it made during the boom period of the pandemic,” Saunders wrote in a statement. “It is also a smaller business than it was before the pandemic.”

The only good news, he added, is that Best Buy remains profitable.

Best Buy’s holiday sales were not as weak as analysts had feared. Its shares rose 2% on Thursday after it reported better-than-expected fourth-quarter sales and profits.

Comparable sales dropped 4.8%. And its quarterly profit declined 7% to $460 million.

Best Buy also recorded $169 million in restructuring charges in the quarter “primarily related to employee termination benefits,” a reference in its press release to upcoming layoffs.

Already, from 2020 to 2023, Best Buy’s headcount declined by 20%, or about 25,000 employees, partly because it closed about 70 large-format stores — or 7% of its portfolio — during that time. This year, the chain expects to close 10 to 15 stores, including a location in Apple Valley this weekend.

In the coming year, Best Buy is rolling out a number of new initiatives. It will send more personalized content to customers, including a more customized homepage of its mobile app.

Instead of major remodels of a few stores, it will make smaller upgrades and refreshes to every store in the chain. It will test a few small-format stores in nonmetro locations.

And it will open a digital and technology office in Bangalore, India, as many other companies such as Target Corp. have also done. Barry said that the company will begin hiring employees for it later this year.

Best Buy also has tech hubs in Seattle and Atlanta.