Best Buy Breaks More Bad News

The fourth quarter of every year for consumer electronic retailers is like the rainy season for farmers; it’s a make-or-break time of year when you have to compensate for the slower sales from the other three quarters. So it was like the  Dust Bowl when Best Buy posted a $1.7 billion loss. This is not quite as bad as it might seem, because their fiscal year ends on March 3, so this only includes December’s sales from last year. Also, the bulk of the loss was due to one-time charges for items including its mobile phone business and the closure of its big box stores in the United Kingdom.

All the same, $1.7 billion is a big number, and the company has announced plans to deal with the loss. It will close 50 of its United States big box stores this year and cut about 400 additional jobs. In spite of these $800 million cuts, the company expects to increase its presence by opening more stores with much smaller footprints.

Clearly, the landscape for consumer electronics retailing is changing in this country. There appear to be more forces at work than just the down economy, as the Internet gives consumers more places to shop and to compare prices. Best Buy is trying to survive these shifts, but looking at the recent history of retailers such as Circuit City, CompUSA, and 6th Ave Electronics suggests that this could be a challenging task.