Best Buy not satisfied with big earnings, more layoffs and closures
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Best Buy not satisfied with big earnings, more layoffs and closures
It is hard for me to understand how a company in an exceptionally low margin industry, electronics, succumbed to the pressure of Wall Street and pursues the same earnings as high margin apparel and other retail goods. To the extent that they continue to slash their workforce (the people who up sell the customer on the services and accessories that actually make money for the company), and continue to reduce store count in an effort to dwindle into an insignificant company. Their current path is not sustainable, eventually there isn't going to be anything left to cut. It's evident from looking at their competitors like Costco, Walmart, and others that the only place people aren't flocking to for electronics is Best Buy. Everyone else is eating their lunch, but it isn't obvious to Wall Street because there is no other pure play electronics retailer to compare to which allows Best Buy to make up whatever kind of nonsense they want to report about the state of the industry. Of course if you dig into the numbers for the manufacturers of their products it's obvious sales are up, not down everywhere besides Best Buy.
https://www.cnbc.com/2024/02/29/best-bu ... -2024.html
https://www.cnbc.com/2024/02/29/best-bu ... -2024.html
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
I'm shocked they are doing as well as they are based on my observations of their stores and store traffic.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
They were over a $50 billion dollar a year company, and are likely to only bring in about $40 billion this year. But earnings will be a few cents per share higher!storewanderer wrote: ↑March 1st, 2024, 11:50 pm I'm shocked they are doing as well as they are based on my observations of their stores and store traffic.
There are few reasons to choose Best Buy for electronics like TVs over Costco, Walmart, or Target for the mainstream customer. Costco being higher end, Target midstream, Walmart lower end although their selection has expanded. The main reasons would be to purchase a top of the line model which usually won't benefit the customer unless they make other upgrades, for example if they want an 8K TV that's great but if they have older audio equipment then it's instantly hobbled to a 4K or possibly lower resolution which completely negates the additional expense. Plus need 8K content which is almost impossible to find. For that high end customer who now can't get any knowledgeable help because of the layoffs, they will just get rung up by a clerk who says "nice TV dude" and they will likely return it in a few days because "8K didn't work." They could have sold them thousands of dollars in additional equipment but instead now they have a TV that will be checked and found to be no defect found so it will have to be sold at a markdown and a loss as open box. Or trucked to a Best Buy outlet at a cost. Notice they've increased the outlet store count? It's because they gave up RTV rights unless the items are truly defective which is a small margin boost up front but a huge liability on the back end, especially when you no longer have any knowledgeable service available to frankly prevent the sale of the products to customers who aren't equipped to operate them. So eventually they will have to stop selling the top end models of all the big brands, removing a huge amount of the selection that differentiates them from the rest.
Now they're head to head with Costco on the new lower top tier. The only reason to shop Best Buy over Costco is if you need financing like 24 months no interest. Gosh, haven't interest rates shot through the roof? So the margin loss of retaining the finance customer is also massive now. Meanwhile Costco will at least give you an automatic extended warranty included in the purchase price, while Best Buy wants hundreds of dollars AND has put a CAP on repair or replacement costs! Yes, if your $1000 TV totally died and can't be fixed the CAP may mean you only get a $500 credit towards a new TV AND they could deduct the cost of repairs performed so far from that. It's a warranty that literally isn't worth the paper it's printed on. And only 14 days return policy vs Costco 90 days. And the Costco included warranty is 2 years so if it does actually break you call and they will authorize full repair or comparable model replacement. So would you go to Best Buy or Costco? I think the choice is clear as to what your Best Buy is.
So that leaves them with high overhead without the support of high margin categories like apparel and others to compete with Walmart on low end and Target on mid tier commodity. Both of them will discount the heck out of electronics in those tiers to get traffic in hoping the customer buys other clothing, household goods etc to make up the margin. Best Buy only has a costly warranty or expensive professional installation to compete and the low to mid tier customers don't need or want those services.
So where does this leave Best Buy? As I see it, bleeding customers out to everyone else. You cannot drive through a Costco parking lot at any given moment without seeing at least three big TVs being loaded into SUVs or trucks regardless of neighborhood. How many do you see actually being loaded at Best Buy? I don't see any, and don't tell me that these customers all need delivery (which conveniently Costco, Target and Walmart offer too).
And the same exact story can be told about the appliance business, Best Buy vs Home Depot, Lowe's, Costco etc. There is zero margin in computers, the only prayer of a profit lies in high margin accessories and warranties which again they laid off the people who up sell those items.
That leaves Best Buy to try to add new product lines where they can only offer niche offerings as they lack the space and customer interest. They now have Greenworks battery operated lawn mowers, chainsaws, etc. Nobody wants them from Best Buy. They have Traeger smokers. Peleton exercise equipment. So only one brand from a category which is the polar opposite of the "best selection" strategy that the rest of the store is built on. Isn't going to work.
They're going to self destruct. At least EPS will be good as they wind down to nothing. The CEO and board need to be fired immediately, and Hubert Joly brought back from his retirement job of teaching business school. Or at least the current C-Suite should be forced to take his classes. He saved the company only for this new greed-driven crew of idiots to make sure that it will die another day.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
Sometimes I honestly forget that Best Buy sells large appliances. It seems like a category for whatever reason, they have pretty much ignored all these years and have advertised very little. They had their chance to really draw people in due to the demise of Sears, but that never really occurred.ClownLoach wrote: ↑March 2nd, 2024, 9:31 am
And the same exact story can be told about the appliance business, Best Buy vs Home Depot, Lowe's, Costco etc. There is zero margin in computers, the only prayer of a profit lies in high margin accessories and warranties which again they laid off the people who up sell those items.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
The large appliance business must not make much for Best Buy. When I looked at them for a purchase they were not going to be able to deliver quickly so I did not go with them, otherwise I may have. I think these third party delivery services are common to multiple retailers so it all comes down to price.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
TVs are a commodity item at this point. The majority does not buy high end OLED or mini-LED sets. They want the largest screen size for a low price. Bonus if you get an extended warranty like Costco does. Many people buy their phones from the carrier to get the deal of the month - free upgrade, free upgrade for life, free upgrades for the family, etc. Sure, you can get a deal through the carrier at best Buy but most of them are "new activation only". And for laptops, there has always been a far broader selection online. At least during the time that Best Buy has been open in the DC area, they have never had the knowledgeable sales force that Circuit City had before they gutted them. That was the differentiator - the commissioned salespeople at Circuit City in those days actually knew about the product they were selling. Best Buy has always been its over there and then the hard sell on an extended warranty. You better do your research before you get to Best Buy. And by the time you've done your research, you've probably found somewhere better and cheaper to buy what you are looking for.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
I wonder how Pacific Sales is doing inside Best Buy?
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
Not well from what I see because they fired all their high paid salespeople in the last round of layoffs. Before you entered a Pac Sales at Best Buy and you were greeted within seconds by a experienced, absolute expert salesperson. I had questions about my range hood and how I could replace it without modifying or replacing my cabinets. I said I could bring measurements and the salesperson instead told me that he could make an appointment for free in home consultation, open it up and verify the mounting, etc. and then show me on their computer exactly which options would fit then I could buy right there and he would coordinate installation. They fired all these people with no notice a couple weeks later. Now there are ordinary employees who hide from customers in that department and refer you to scan the QR code on the price tag if you have questions. Nobody is going to buy luxury appliances, many which are built in and cost up to $10,000 for giant fancy ranges and massive refrigerators, from a guy making minimum wage who tells you to look online for info.
Best Buy had also built a beautiful new showroom for Pacific Sales in Cerritos, probably their nicest store since most were in more industrial areas. They closed it.
From what I can tell Pacific Sales no longer exists and is just some wall decor in selected locations. Destroyed just like Magnolia was. Best Buy doesn't understand that the luxury buyer isn't going to scan a QR code or measure their cabinets and inspect mounting themselves, they're just going to find a better place to buy that does all that for them. You couldn't possibly install one of those colossal Wolf ranges with 8 burners and 2 side by side ovens yourself anyway! I expect they'll just give up and clearance out the rest of the Pac Sales line as part of this latest round of layoffs. The departments were filling up with open box returns anyway from customers sold something that won't work/fit/do what they want.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
Thank you and..................................amazingClownLoach wrote: ↑March 3rd, 2024, 10:38 pmNot well from what I see because they fired all their high paid salespeople in the last round of layoffs. Before you entered a Pac Sales at Best Buy and you were greeted within seconds by a experienced, absolute expert salesperson. I had questions about my range hood and how I could replace it without modifying or replacing my cabinets. I said I could bring measurements and the salesperson instead told me that he could make an appointment for free in home consultation, open it up and verify the mounting, etc. and then show me on their computer exactly which options would fit then I could buy right there and he would coordinate installation. They fired all these people with no notice a couple weeks later. Now there are ordinary employees who hide from customers in that department and refer you to scan the QR code on the price tag if you have questions. Nobody is going to buy luxury appliances, many which are built in and cost up to $10,000 for giant fancy ranges and massive refrigerators, from a guy making minimum wage who tells you to look online for info.
Best Buy had also built a beautiful new showroom for Pacific Sales in Cerritos, probably their nicest store since most were in more industrial areas. They closed it.
From what I can tell Pacific Sales no longer exists and is just some wall decor in selected locations. Destroyed just like Magnolia was. Best Buy doesn't understand that the luxury buyer isn't going to scan a QR code or measure their cabinets and inspect mounting themselves, they're just going to find a better place to buy that does all that for them. You couldn't possibly install one of those colossal Wolf ranges with 8 burners and 2 side by side ovens yourself anyway! I expect they'll just give up and clearance out the rest of the Pac Sales line as part of this latest round of layoffs. The departments were filling up with open box returns anyway from customers sold something that won't work/fit/do what they want.
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Re: Best Buy not satisfied with big earnings, more layoffs and closures
I went to the Pacific store in Rancho Mirage/Palm Desert a couple years ago (mid COVID--height of supply chain problems) carrying a bagful of dishes to test-fit them into higher-end dishwashers. I had exactly that experience...extraordinarily well prepared folks who were glad to help.
If those people are gone, you're absolutely right---utterly no reason to visit there if there isn't that kind of help. Will either downscale to Lowes/HD/BB or upscale to Perche/Ferguson/Abt. (BTW ended up at Abt after Lowe's cancelled on me...Abt drop-shipped to California within 7 days no muss no fuss. Really a joy to deal with.
If those people are gone, you're absolutely right---utterly no reason to visit there if there isn't that kind of help. Will either downscale to Lowes/HD/BB or upscale to Perche/Ferguson/Abt. (BTW ended up at Abt after Lowe's cancelled on me...Abt drop-shipped to California within 7 days no muss no fuss. Really a joy to deal with.