Best Buy to furlough about 51,000 employees

Best Buy saw increased demand in March as people bought freezers, computer monitors and other items to use for their stays at home during the pandemic, but the company said it’s now made the same decision as many other retailers: It’s furloughing thousands of employees and taking other cost-cutting measures.

Starting Sunday, Best Buy said it will furlough about 51,000 employees. The decision will impact nearly all of its part-time store employees and some of its full-time store employees in the U.S., according to a news release. About 82{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of its full-time store employees will continue to be paid.

Best Buy’s shares were down nearly 6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} Wednesday morning. Best Buy shares, which have a market value of $16.8 billion, are down 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} since the start of the year. 

Best Buy is one of the many U.S. retailers who have had to adapt and make tough decisions as the pandemic disrupts customers’ lives and changes their behavior. Since March 22, the company’s stores across the country have been closed and it’s suspended all in-home delivery, installation and repairs. Best Buy has continued to offer curbside pickup at its stores.

Initially, Best Buy continued to pay its employees, but as the disruption drags on it will stop paying furloughed employees on Sunday, but continue to provide health benefits to them. It will cover the total cost of the benefits for at least three months, according to a news release.

Best Buy initially saw a sales surge as the pandemic sparked demand for items that help people work from home, students attend school remotely and families stockpile and cook larger quantities of food. During an eight-day period that ended March 20, its sales were up by about 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} as people bought computers, kitchen appliances and more. The company’s quarterly sales through March 20 grew by about 4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, exceeding the company’s expectations for the period.

Since then, however, Best Buy’s sales have dropped off. The company said it’s seen more demand for some items, such as gaming devices, but has had a sales decline of 30{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} since March 21. 

In a video message, Barry said company leaders have focused on three goals: serving customers in a safe way, keeping as many of its workers employed as possible and setting up the retailer so it’s “well-positioned to thrive in what will almost certainly be a new and very different environment.” She touted the strength of Best Buy, noting that the company has retained about 70{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of its sales compared to last year, even though customers have not set foot in stores and crews haven’t been going to homes for several weeks.

She said online sales in the U.S. are up more than 250{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, and about half of those sales are picked up at its stores.

Barry said in the video message that Best Buy goes to customers’ homes more than a million times in a typical year, but decided to halt that business and do contactless doorstep dropoffs instead because of safety concerns.

“We’ve learned a great deal since then and we are working to get back into people’s homes in the near future,” she said.

In addition to the furloughs, Best Buy’s top executives, including its CEO, will take pay cuts. Barry will receive half her salary, and company executives who report directly to Barry will take a 20{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} pay cut to their base salary through at least Sept. 1. The company’s board will be paid half of their cash retainer fees during the same period.

In mid-March, Best Buy withdrew fiscal 2021 financial outlook. It also drew the full amount of its $1.25 billion revolving credit facility and suspended all share buybacks.

The company said its taken other actions to rein in its budget during the pandemic, including suspending 401k matches, lowering capital spending and slashing marketing expenses.

Best Buy said it’s creating a $10 million employee assistance fund with the company’s founder, Dick Schulze. The fund will help part-time and full-time hourly workers who have been with the company for more than a year. The retailer is repurposing its annual corporate giving budget to contribute to the fund.