MINNEAPOLIS – Best Buy Co. Inc. (BBY) may lay off some workers as the nation's largest consumer electronics retailer looks to rein in spending, a spokeswoman said on Wednesday.
A memo from Best Buy President Brian Dunn this month asked managers to find spending to cut, Best Buy spokeswoman Susan Busch said.
The idea was to tell managers, "this is what we're up against, we want to talk about the work we're doing and what implications it might have, and to talk about the transformational changes that are under way," she said.
Busch said the changes could include layoffs. Best Buy employees will be told more about potential layoffs in April, she said.
Busch said the memo did not include a cost-savings target. On Wednesday, the Minneapolis Star Tribune reported that Best Buy is seeking $300 million in savings during the current fiscal year.
Wall Street sent Best Buy shares plunging by 12 percent on a single day in December when the company acknowledged that its sales and administrative expenses had risen 22 percent for the quarter. Chief Executive Brad Anderson called the spending "unacceptably high" at the time.
The extra spending comes as Richfield, Minn.-based Best Buy is remaking many of its store to cater to certain types of customers. For example, it has added personal shoppers at stores aimed at suburban soccer moms, or added high-end home theater sections at stores aimed at affluent professional men.
Credit Suisse analyst Gary Balter said in a research note on Wednesday that the $300 million figure would amount to about 5 percent of Best Buy's expenses, which he called "very significant." That would be enough to push 2006 earnings guidance above the current $2.65 per share expected by analysts, he wrote.
"Many of the cost cuts could come at the store level, where the company may have gone (too) far in hiring layers of management" at the stores that focus on certain customer segments, Balter wrote. Some stores have managers for each segment, such as soccer moms.
"We believe this type of extra is not necessary and eliminating these positions will not significantly impact the company's service-centric strategy if done properly," Balter wrote.
Best Buy shares slipped 49 cents to $54.67 in afternoon trading on the New York Stock Exchange.