Minneapolis -- Best Buy is looking to reinvent its future and late Monday announced a series of moves designed to enhance the company’s growth prospects and profitability.
On the domestic front, Best Buy said it plans to double the number of Best Buy Mobile stores by the end of the current fiscal year by opening 150 new freestanding stores to give it a total of 325 units. The company said the Mobile stores fit with its “connected world” strategy and have rapidly grown wireless connection revenue and profits in the United States. Conversely, expansion of Best Buy’s large format stores will slow considerably as only six to eight new units are planned for the current fiscal year. That equate to 1% square footage growth, which is well below the 5% rate seen during the past five years.
A series of international moves were also announced including expansion of Best Buy branded large format stores in Canada, United Kingdom and Mexico. While a total of 18 big Best Buy stores are planned for those markets, the company said it would close its nine Best Buy branded stores in China to increase the emphasis on its Five Star brand stores. Between 40 and 50 Five Star stores are planned that should give Best Buy a total of 210 Five Star stores by year end.
The company also said it would cease operations in the test market of Turkey and undertake a restructuring of its supply chain operations.
“We’re pleased to continue our investments in the Best Buy Mobile and Five Star business models, which are profitable and have significant growth opportunities,” said Brian Dunn, CEO of Best Buy. “The actions we are taking are consistent with our strategy of driving businesses that have earned the right to additional capital while curtailing activities that we believe will not meet our return on investment thresholds.”
The moves will result in charges during fiscal 2011 and 2012 totaling between $225 million to $245 million, with a 33 cent to 36 cent impact on earnings per share in fiscal 2011. By the following fiscal year, Best Buy said it expects to realize annual savings between $60 million and $70 million.