Best Buy Furloughs 51K Associates to Combat 30% Sales Decline
While Best Buy has found some success with its brick-and-mortar pivot to curbside-only service, the retailer is furloughing approximately 51,000 hourly associates for at least three months to offset declining sales from store closures.
After temporarily shuttering its stores on March 21 to combat the spread of the coronavirus, Best Buy swiftly implemented a curbside pickup only model.
“This temporary model has been a remarkable success," CEO Corie Barry said in a video.
When combined with online orders shipped directly to customers it has allowed Best Buy to retain approximately 70% of its sales vs. the prior-year period.
“That’s 70% even though not a single customer has stepped foot in our stores in almost a month," Barry stressed.
The sales levels are "a testament to the strength of our multichannel capabilities,” noted Barry, “as our domestic online sales are up over 250%, and approximately 50% of these sales are from customers choosing to pick up their products at our stores since moving to our curbside service model.”
While the company experienced heightened demand for select products — such as those used for telework, freezing food and gaming — year-over-year sales decreased about 30% from when the retailer closed stores through April 11.
Sales for the 9-week period ending April 4 declined approximately 5% vs. the prior-year period.
In addition to the labor cuts, which begin April 19, Barry is foregoing 50% of her base salary, while members of the Best Buy board of directors are foregoing 50% of their cash retainer fees through at least Sept. 1. Executives who report directly to Barry are also taking a 20% reduction in base salary through at least that time.
The company is also implementing a series of cost-cutting measuring that includes reducing marketing, promotional and capital spend; extending payment terms with select vendors; and suspending its 401(k) matching program.
Furloughed employees will retain their health benefits for a minimum of three months, as well as any tuition reimbursement they’re currently receiving.
Despite these cuts, 82% of Best Buy’s full-time store and field employees will remain on payroll.
Best Buy founder Dick Schulze is also working with the retailer to establish a $10 million employee assistance fund that’s available to all part- and full-time hourly employees who have been with the company longer than a year.
Until stores can open again, "as you would expect, we are focused on making the difficult decisions necessary to ensure that at the end of this crisis Best Buy remains a strong, vibrant company,” said Barry.
Barry said the company is preparing to re-open them to customers as soon as it is safe to do so, “with timing likely to vary at state and local levels.” The company operated 1,175 large-format and 56 small-format stores as of Feb. 1.