Despite plenty of cash on the balance sheet and profits running high year-round in a pandemic that has spurred epic tech gadget purchases, even the mighty Best Buy (BBY) realizes that it needs to further streamline its store base to position itself for the future of accelerated digital consumption.
“When we look at the short term, there will be higher thresholds for renewal of leasing agreements when we assess the role each store plays in their market, the investments required to meet our customer needs, and the expected return based on a new retail country. For coherence, we have approximately 450 leases that will be renewed over the next 3 years or an average of 150 each year, “pointed out Best Buy CEO Corie Barry at an earnings conference Thursday.
Continued Barry, “As part of the review process, we have closed approximately 20 large format locations each of the last two years and expect to close a higher number this year. We have also reduced the length of our average rental period, which will continue to give us flexibility.
Best Buy ended 2020 with 1,159 stores in the United States, Mexico and Canada. It is down from a high of 1,779 in 2014.
Best Buy’s looming store closure is likely to reflect the changes that the pandemic has brought to shoppers’ behavior. Consumers not only shop online for convenience, but also choose to pick up orders at Best Buy parking lots. All of this means less need to run a large-format Best Buy store that may be underperforming given the cost of running the store.
“In addition to our physical stores, our operating model must evolve to accommodate our customers, changing their shopping behavior, which has been accelerated by the pandemic. The sudden and lasting shift that customers have made to shop more regularly and seamlessly across all our channels forced us to look at how we get our work done, ”Barry explained.
Best Buy’s decision on stores comes after a mixed holiday quarter.
Net revenue of $ 16.94 billion Come short in the analysts’ estimate of $ 17.23 billion. Domestic sales in the same store increased 12.4% and missing forecasts for analysts increased by 14.9%. Domestic online sales increased 89.3%, showing a further slowdown from the third and second quarters. Adjusted earnings of $ 3.48 per. Stock beat estimates by 3 cents.
For the full year, Best Buy expected a continued slowdown in sales as people get vaccinated and return to take walks and eat out. Best Buy sees the 2021 store’s same store sales fall 2% to increase 1%.
Best Buy shares fell 9.2% on the news.
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