Best Buy to Shutter 50 Stores
- Apr 16, 2012
By Dees Stribling, Contributing Editor, and
Nicholas Ziegler, News Editor
Over the weekend, the giant electronics retailer Best Buy said that it will close about 50 stores out of its total of around 1,100. The announcement came not long after the sudden resignation of CEO Brian Dunn, for as-yet unclear but possibly scandalous reasons, though it seems unlikely that the two events are directly related.
In any case, Best Buy said the stores will be closed by May 12 of this year. More were in California than anywhere else (seven), though Illinois and Minnesota are both seeing six stores close. Closures will also occur in 18 other states and Puerto Rico. Despite the closings, the company says that it will continue to remodel other stores and roll out smaller-format stores called Best Buy Mobile — it plans to have approximately 100 stores using the format by the end of 2012.
The company notified the affected stores of their impending closing on Saturday morning. The initial announcement came on the heels of Best Buy’s year-end earnings report, which showed a loss of $4.89 per share for the fourth quarter alone. The retailer aims to trip $800 million in costs by 2015, partially by “decreasing overall square footage for increased flexibility,” according to the company’s press release.
One of the possible reasons for the retailer’s contraction plans is a general push for smaller store footprints, according to services firm Cushman & Wakefield Inc. The CRE firm noted in its 2012 outlook that the average size of big-box stores has been on the decline for some time. “Even before the recession, stores were shrinking in size,” Cushman wrote in its report. “In 2004, the average Best Buy generally occupied 45,000 square feet. In 2011, however, two-thirds of the 90 stores opened were smaller than 30,000 square feet.”
Additionally, with Best Buy’s announcement to further the Best Buy Mobile pop-up format mirrors another industry trend. Other retailers, such as Target, have experimented with smaller stores that don’t necessitate a full flagship investment. Target’s Missoni brand pop-up store — that appeared in Manhattan in the summer of 2011 — sold out of its inventory within hours and captured significant media attention.
Sears, once among the greats of big-box retailers, announced a similar move in December of last year, The chain, in the midst of heavy restructuring, moved to close between 100 and 120 Sears and Kmart locations. At the time, Bill Rose, the San Diego–based national director of Marcus & Millichap’s National Retail Group, told Commercial Property Executive that he foresees potential problems given the typical store footprints of about 100,000 square feet.
Rose noted that retailers that are currently expanding — and he mentioned Best Buy specifically, along with TJ Maxx and HHGregg — are typically looking for smaller spaces of approximately 30,000 square feet.