Best Buy set to fortify Canadian operations
Print Edition
BEST Buy Co plans to close some stores and consolidate its operations in Canada, the US electronics retailer’s second-largest market, in a move that will hurt earnings this year.
The retailer said over the weekend that it will close 66 of its Future Shop stores in Canada and convert 65 of them to Best Buy brand stores. The move to a single brand will cut 500 full-time and 1,000 part-time jobs, and cost the company about US$200 million to US$280 million in restructuring charges, Best Buy said.
Best Buy also said it plans to spend C$200 million (US$160 million) to improve its online operations in Canada, boost staffing at remaining stores, and launch a range of home appliances.
The largest US electronics retailer expects these changes to cut earnings per share by 10 cents to 20 cents in the current year. That is up to 8 percent of the average analyst estimate for fiscal 2016 earnings per share of US$2.56, according to Thomson Reuters StarMine.
Analysts said the consolidation made sense as Best Buy and Future Shop often offered similar promotions and products. Some of their stores were so close to each other that they shared parking spaces.
“We believe the long-term benefits of the store closings will more than offset the short-term costs,” said Moody’s Vice President Charlie O’Shea.
After the restructuring, Best Buy will be left with 136 large-format stores and 56 Best Buy Mobile stores in Canada.
Since 2012, Best Buy has removed layers of management, cut jobs, shut stores and boosted cash reserves to grapple with competition from Amazon.com Inc and other online retailers.
The efforts resulted in a better performance for Best Buy during the 2014 holiday season. Earlier this month, CEO Hubert Joly said Best Buy planned to cut costs to save US$400 million over the next three years.
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