Best Buy steps up digital overhaul while looming delay

The electronics store has laid off employees and cut hours for some store employees in recent weeks. The company employed about 102,000 at the end of its last fiscal year, up from about 123,000 at the start of the year, CEO Corie Barry said on Thursday during a phone call with analysts. The decline is mainly due to attrition, she said. About 5,000 workers were fired or chose to quit after their hours were cut, she said.

Redundant employees have until Friday to find another job in the company or qualify for severance pay, according to a “severance pay summary” given to some employees and reviewed by The Wall Street Journal.

“The customer has completely changed the way he thinks about shopping,” Ms. Barry said on Thursday during a phone call with reporters. “We have done everything we can to adapt to the new reality.” After the busy holidays, the company felt it “necessary to adapt our work to this new reality”.

Traffic to stores and online picks fell by about 15% during the three months ended Jan. 30, she said, meaning fewer sales staff are needed in brick-and-mortar stores. In addition, the company is making more full-time part-time jobs for flexibility, she said.

Comparable store sales, that of stores and digital channels operating for at least 12 months, increased 12.6% in the three months ended January 30. The company reported a 23% revenue increase in the previous fiscal quarter.

Executives warned Thursday that growth is likely to slow in the second half of this year. They predict comparable sales between minus 2% and plus 1% for the new fiscal year. On that comparable basis, sales increased by 9.7% in the past financial year.

The stock fell more than 6% mid-morning trading on Thursday.

Best Buy is one of many companies trying to capitalize on pandemic shifts in shopping habits and a massive increase in sales to accelerate a new strategy, sometimes with big implications for ordinary employees.

“As part of Best Buy’s business strategy, changes have been made to our store’s operating and staffing model to support how we meet customers when and where they need us, which is rapidly changing in today’s environment,” it said. summary of severance payments “. by the Journal.

Some store associates said layoffs seemed counterintuitive after a few quarters of strong growth and difficult conditions for employees. “The last six months have been tough,” said Richard Canepa, a 23-year-old who spent five years at a Best Buy in Louisiana, most recently as a full-time sales consultant.

Mr. Canepa remained employed during the coronavirus pandemic, including working from home and phone sales. Earlier this month, the company gave him the choice of moving to a part-time job, which would mean losing his health insurance, he said. Instead, he took a severance package and said he hopes for a job in web development.

Other retailers who reported strong sales during the pandemic have made similar plans to accelerate the strategy. Walmart Inc.,

The country’s largest retailer by revenue said last week it would boost investments in technology, e-commerce and automation after a year of sales grabbed by Covid-19. This year “has led us to take the company where we want it to go and do it ahead of schedule,” said Brett Biggs, Walmart’s chief financial officer, in an interview last week. Walmart gives pay increases to some workers, such as retailers and store employees who collect orders online, while the minimum wage remains at $ 11 an hour for others.

Best Buy has seen a more marked shift to online buying during the pandemic than retailers selling groceries or other products that buyers still want to touch and feel. In the most recent fiscal quarter, online sales grew nearly 90% to $ 6.7 billion and represented 43% of total US sales, almost double compared to the same period last year.

During the pandemic, the company accelerated online order pickup from the roadside and shifted more retail space to warehouse and fulfillment operations.

Part of the company’s strategy is to train more store employees to perform multiple tasks so that they can easily switch tasks or take shifts in different stores. More than half of the workers were trained to “get into different work zones,” Ms. Barry, the CEO, said in November, and some can add shifts by delivering from home or working in different stores.

After the workforce shrank last fiscal year, “the question from here is how our employees can choose different skills and certifications so they can meet the customer wherever they go,” Ms. Barry said Thursday.

Workers shifted to make more virtual sales, as well as chat, phone and remote support, Ms. Barry said during Thursday’s call. The company is hiring more people in areas such as supply chain, small package delivery and technology, she said.

Store managers and regional managers have known for over a year that a strategy shift is underway, a Best Buy store manager said. Still, the accelerated pace of the new strategy, the timing and the employees targeted in layoffs have hit shop morale, this person said.

“Vacation was tough,” said this manager. “We worked at uncertain hours. We worked with potentially infected customers, potentially infected employees. I let employees quit, managers quit for no other reason than they thought they were going to die. About a dozen workers were laid off in this person’s shop, most of them full-time workers, the manager said.

“Our stock [price] was sky high, ”said the manager. “That’s why we were so shocked that they decided to do these layoffs.”

Like other retailers, Best Buy gave employees a range of bonuses during the pandemic. It raised the starting wage for American workers to $ 15 last August. Earlier this week, it said it would give another round of bonuses to employees, including those recently laid off. It also offers employees a day of paid vacation as a reward if they have been vaccinated against Covid-19, as well as paid post-vaccination sick leave if needed.

As soon as the pandemic hit, Best Buy moved quickly to save money, current and former executives said. At the end of last year, the company offered early retirement buyout packages to all employees of the company over the age of 55, which is lower than the traditional 60-year threshold, some of these people said. Best Buy closed its stores at the start of the pandemic, except for street-side pickups, and in April it left about 51,000 employees, including nearly all part-time workers.

In June, it started bringing back some of those employees, but in some cases shifted their duties to fulfill online or answer customer service questions from their home.

Some chains have not gotten through the pandemic so well and electronic retailers have struggled for years as more online purchases shifted. This week, Fry’s Electronics Inc. that it would go out of business and permanently close all 30 stores and close its operations.

Write to Sarah Nassauer at [email protected]