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Best Buy in Trouble, Offers Staff Buyouts

Old 12-16-08, 04:09 PM
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Best Buy in Trouble, Offers Staff Buyouts

Best Buy 3Q profit sinks, offers staff buyouts

Tue Dec 16, 11:34 AM EST

Best Buy Co. Inc. , the nation's biggest consumer electronics retailer, said Tuesday that its third-quarter profit sank 77 percent as it faced dramatic changes in consumer spending.

The company also said it will offer massive buyout packages to about 4,000 employees at its headquarters while slashing spending in a bid to cut costs, news that the sent the retailer's stock soaring.

Executives called the past three months the "most challenging consumer environment" in the retailer's history.

"We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace," Chief Executive Brad Anderson said in a statement. "We also believe that customers will continue to reward those retailers who understand their needs and desires, and offer relevant solutions at fair prices. Yet we clearly recognize that these changes require us to make significant adjustments."

Richfield, Minn.-based Best Buy said it will offer enhanced buyout packages to nearly all its corporate employees while cutting capital spending by 50 percent in 2009. The chain also plans to open "significantly" fewer stores in the U.S., Canada and China and said it may have to lay workers off depending on how many employees accept the buyout offer. The company had about 150,000 full-time, part-time and seasonal workers as of April, according to a regulatory filing.

"We need to prepare our organization to operate in a wide range of potential macroeconomic scenarios in the coming year," Anderson said. "We believe our broad, voluntary program helps prepare us for the unpredictable year ahead while reflecting our company values and respect for our people."

Tuesday's news comes about a month after Best Buy's biggest rival, Circuit City Stores Inc., filed for Chapter 11 bankruptcy protection, under pressure from vendors and consumers who aren't spending.

Best Buy's third-quarter profit skidded to $52 million, or 13 cents per share, in the three months ending Nov. 29. That's down from $228 million, or 53 cents per share, during the same period last year.

Excluding a charge related to a decline in market value of its 2.9 percent stake in U.K. company Carphone Warehouse Group PLC, the company's net income came to 35 cents per share.

The earnings were boosted by strong Thanksgiving weekend sales, which helped Best Buy post results well ahead of the 24 cents per share analysts polled by Thomson Reuters expected.

Revenue climbed 16 percent to $11.5 billion, from $9.93 billion last year. Analysts expected revenue of $11.09 billion.

Same-store sales, or sales in stores open at least 14 months, fell 5.3 percent during the quarter. Same-store sales are considered a key indicator of a retailer's health because they measure sales at existing stores rather than newly opened ones.

"(Best Buy) may be a bellwether here," Stifel Nicolaus & Co. analyst David Schick told investors in a research note Tuesday. "We want to hear retailers talk about the consumer slowdown in a historic sense and match the slowdown with historic changes to the model."

But he added some of his concerns were alleviated by the company's "bold management moves" and weak competitors.

Also Tuesday, Best Buy reiterated its full-year guidance for earnings of $2.30 to $2.90 per share, excluding the investment charge, and expects same-store sales will fall 1 percent to 5 percent for the year. Analysts expect earnings of $2.51 per share.

Best Buy shares climbed $3.60, or 15.3 percent, to $27.07 in midday trading Tuesday.

http://www.comcast.net/articles/fina...Earns.Best.Buy

Will BB be going the way of CC?

Last edited by Goldblum; 12-16-08 at 04:11 PM.
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Old 12-16-08, 04:17 PM
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Originally Posted by Goldblum View Post
Will BB be going the way of CC?
BB is still turning a profit, so no.
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Old 12-16-08, 04:20 PM
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Originally Posted by Goldblum View Post
Will BB be going the way of CC?
I doubt it. They have less debt and seem to be on top of things. I expect it will be a stronger than expected Christmas season (my own opinion, based on personal observation and wild conjecture). Add to that the digital TV transition in Feb which I believe will result in more TV sales as certain people will find the converter boxes too complicated (conjecture again). Factor in the reduced competition and I think they will do better than most other retailers at least for the next two quarters. Management seems to be on the ball, so I think they will do okay.
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Old 12-16-08, 05:45 PM
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Everytime I go there about 80 percent of the dvd's(mostly tv series) that I am looking too buy aren't in stock and everything else is at least 7 dollars more expensive than the cheapest online price plus add in sales tax and I don't understand why people rush to buy anything there.
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Old 12-16-08, 06:01 PM
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Originally Posted by dvd-4-life View Post
Everytime I go there about 80 percent of the dvd's(mostly tv series) that I am looking too buy aren't in stock and everything else is at least 7 dollars more expensive than the cheapest online price plus add in sales tax and I don't understand why people rush to buy anything there.
I agree. I just sold two BB gift cards on eBay because I can't stomach their high retail prices.

The only times I bought anything there in the last 18 months was when the had an exclusive steelbook or something. Before that, I just didn't know any better.
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Old 12-16-08, 06:40 PM
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I was thinking of picking up some BB stock at some point but I keep thinking back to earlier this fall when my state had a tax free weekend for some kind of crap and BB had participated. I bought a packaged computer for about 600.00 and they just kept trying to get more money out of me. First there was the Protection Plan on each item. Then it was extra items they would give me discount on. Then it was some software they could install and run that would make my computer so much faster. She also stated that I would be spending 7-8 hours registering software before I actually got to use the computer and this program would do it automatically. I said no to this to. I figure they were going to sign me up to MS Office, Norton and etc. and more CC charges.

I almost walked away when she kept going on about the protection plan and how the MB could fry itself if I did something wrong.
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Old 12-16-08, 06:47 PM
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I love how it's all gloom and doom because profit fell 77%, but the fact remains they made $52m in a quarter. Note, that is still PROFIT.
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Old 12-16-08, 07:26 PM
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Originally Posted by ernestrp View Post
I was thinking of picking up some BB stock at some point but I keep thinking back to earlier this fall when my state had a tax free weekend for some kind of crap and BB had participated. I bought a packaged computer for about 600.00 and they just kept trying to get more money out of me. First there was the Protection Plan on each item. Then it was extra items they would give me discount on. Then it was some software they could install and run that would make my computer so much faster. She also stated that I would be spending 7-8 hours registering software before I actually got to use the computer and this program would do it automatically. I said no to this to. I figure they were going to sign me up to MS Office, Norton and etc. and more CC charges.

I almost walked away when she kept going on about the protection plan and how the MB could fry itself if I did something wrong.
Since all that stuff makes them a ton of money, I'd think that it'd be more motivation to be a stockholder... bleed 'em dry. It obviously works. I think the overpriced Geek Squad "help" is a huge profit center for them.
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Old 12-16-08, 08:25 PM
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-mod snip-

you know better than that. -namja

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Old 12-16-08, 08:29 PM
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Originally Posted by ernestrp View Post
I almost walked away when she kept going on about the protection plan and how the MB could fry itself if I did something wrong.
BB employees will tell you anything to get you to buy a service plan.

You wouldn't believe some of the whoppers I've been told (or been told about by others)...
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Old 12-16-08, 08:59 PM
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A friend of mine worked for Geek Squad for little more than a year. To this day, he's still baffled by how poorly organized the place is, and how middle management is so eager to meet their all-important quotas that they not only overlook, but often encourage, shoddy workmanship.

And, yes, $52 million is still a decent chunk of change as profit, but when you made $228 million just a year ago, it's pretty shocking. I mean, I've just about always lived paycheck-to-paycheck, so I don't know what it's like to have money lying around for investment, or a savings account, that kind of thing. Still, I expect if I had a sizable amount of money for those things last year, and this year it was down by that much, I'd be freaked out, too. Everyone is trying to figure out how to weather this storm, but the thing is, nobody knows just how much longer (or how much worse) this storm is going to be. It's one thing to say, "Well, 2008 sucked; let's get on to 2009." It's another thing to realize that '09 might make us all pine for the good days of '08.

Personally, I think the bigger issue is that by now, most people have already either gotten a serviceable piece of technology for themselves, or they've decided they're not interested. We're poor, and even we've managed to piece together an HDTV, an upconverting 5-DVD changer, an iPod Classic (5G), 320GB external hard drive and a Wii by now. Granted, they're almost all low-end pieces, but they work just fine for us. All we're left buying is media to play. That's where Redbox, Netflix, the library and Half Price Books come in; we rarely pay full price for much of anything these days, and we're not afraid of used products.
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Old 12-16-08, 09:19 PM
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, $52 million is still a decent chunk of change as profit,
Only if it satisfies stockholders. It is to you and I, but it may not be when its divided out by shares. You cant look at the dollar amount, you have to look at ROI.
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Old 12-16-08, 09:27 PM
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Originally Posted by BKenn01 View Post
Only if it satisfies stockholders. It is to you and I, but it may not be when its divided out by shares. You cant look at the dollar amount, you have to look at ROI.
Compared to the world, their stock is doing just fine.

ROI is very much related to the bottom line as posted, not sure what you are getting at there.
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Old 12-16-08, 10:30 PM
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I was just trying to point out that 52 million may not be a satisfactory profit in Best Buys world. People tend to look at company profits from there perspective of the dollar amount.
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Old 12-16-08, 10:53 PM
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hope they rot in hell lol.

Selling blu-rays for $30 or more when its considerably cheaper else where
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Old 12-16-08, 10:56 PM
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and they made myrewardzone a POS. $5 for spending $250. wtf. it used to be $5 for every $50
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Old 12-17-08, 12:19 AM
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Originally Posted by WiiDSmoker View Post
and they made myrewardzone a POS. $5 for spending $250. wtf. it used to be $5 for every $50
that is a lie, it was $5 for every $125.

why do you always do that.
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Old 12-17-08, 04:02 AM
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Originally Posted by Superman07 View Post
I love how it's all gloom and doom because profit fell 77%, but the fact remains they made $52m in a quarter. Note, that is still PROFIT.
Um, ok. But if it keeps falling at that rate, it won't be profit for long. They're making adjustments now to avoid disaster.
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Old 12-17-08, 04:53 AM
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Originally Posted by ernestrp View Post
I was thinking of picking up some BB stock at some point but I keep thinking back to earlier this fall when my state had a tax free weekend for some kind of crap and BB had participated. I bought a packaged computer for about 600.00 and they just kept trying to get more money out of me. First there was the Protection Plan on each item. Then it was extra items they would give me discount on. Then it was some software they could install and run that would make my computer so much faster. She also stated that I would be spending 7-8 hours registering software before I actually got to use the computer and this program would do it automatically. I said no to this to. I figure they were going to sign me up to MS Office, Norton and etc. and more CC charges.
If I were to buy a computer there, I'd know that the store makes next to nothing selling a computer...most are probably sold at a loss. I also know that selling of all that other junk is where the store makes money/keeps the managers off the backs of the minimum wage blue shirts. And I know what its like to be hounded by a mangers to meet #'s/percentages/whatever.

That doesn't mean I'm going to say yes...
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Old 12-17-08, 11:17 AM
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Originally Posted by BKenn01 View Post
Only if it satisfies stockholders. It is to you and I, but it may not be when its divided out by shares. You cant look at the dollar amount, you have to look at ROI.
If you go back and read the entirety of my post, or even just the next sentence, you see that I make this point myself. I hate it when people take an excerpt and respond to it, even though it's already addressed in the original post.

Also, I miss Hog Wild barbecue in Bardstown. That place was great.
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Old 12-17-08, 11:27 AM
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These voluntary buyouts were anything but voluntary. The choice given was stay for a few months with 5% chance of employment or take almost a year of severance now.
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Old 12-17-08, 12:57 PM
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Originally Posted by WiiDSmoker View Post
hope they rot in hell lol.

Selling blu-rays for $30 or more when its considerably cheaper else where
Probably one of the few items they're making a profit on. I don't think a lot of customers realize how little profit margin there is (if any) between what a store charges for a DVD/Blu-ray and what the studio is charging the store. The studios are the real "thieves" - don't blame Best Buy for trying to make a few bucks (no doubt to make up for all the loss leaders they still offer on DVD).

One of the few times you'll see me defend BB in a thread - far from my favorite corporation.
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Old 12-17-08, 03:58 PM
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It shouldn't be surprising.

When the economy is circling the bowl and people are worried about whether or not they'll be working three months from now, over-priced consumer electronics, CDs, video games, and DVDs are probably going to be the first things sacrificed. If I'm concerned about getting laid off, then that new iPod is going to be the first thing to go.
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Old 12-17-08, 04:33 PM
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Originally Posted by Shannon Nutt View Post
Probably one of the few items they're making a profit on. I don't think a lot of customers realize how little profit margin there is (if any) between what a store charges for a DVD/Blu-ray and what the studio is charging the store. The studios are the real "thieves" - don't blame Best Buy for trying to make a few bucks (no doubt to make up for all the loss leaders they still offer on DVD).

One of the few times you'll see me defend BB in a thread - far from my favorite corporation.
100% correct.
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Old 12-17-08, 06:12 PM
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If you go back and read the entirety of my post, or even just the next sentence, you see that I make this point myself. I hate it when people take an excerpt and respond to it, even though it's already addressed in the original post.
My apology.

Also, I miss Hog Wild barbecue in Bardstown. That place was great.
If you are familiar with the area, they moved to Lebonan Jct. Just off the I-65exit.
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