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.
“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.