Best Buy will furlough 51,000 store employees in the U.S., or about 40% of its total workforce, as its stores remain closed nationwide aside from curbside pickup.
The Minnesota-based retailer's sales were up 4% heading into the pandemic, and surged 25% in one week in mid-March as consumers preparing to hunker down at home rushed to buy computers, keyboards, webcams and other home needs.
While it continues to see strong demand for those products, Best Buy said Wednesday that sales have plummeted 30% in the past month since stores have closed to the public.
Chief executive Corie Barry said the quick pivot to curbside pickup last month when stores were closed has been a "remarkable success," helping the company to retain many sales. Online sales have skyrocketed 250% in that time, about half of which from curbside pickup orders and the rest orders shipped to homes.
[CORONAVIRUS: Click here for our complete coverage » arkansasonline.com/coronavirus]
"Seventy percent of our normal business is quite an achievement given that we have gone from being a retailer with nearly 1,000 stores to one that does all of its business online," she said in a video message sent to corporate employees Wednesday morning. "But 70% also means we're losing 30% of our normal business. This means we cannot operate normally for very long or we risk harming the company."
Barry said she and the board of directors will forgo 50% of their base salaries or cash retainer fees through at least Sept. 1. Executives who report directly to her are taking a 20% pay cut.
In recent weeks, hundreds of thousands of retail workers across the U.S. have been furloughed as many stores shuttered for an unknown period because of the pandemic. Department stores and specialty apparel retailers have been hit especially hard. Macy's, for example, has said that it has lost the majority of its sales, even though it continues to fulfill online orders.
Best Buy will furlough all of its part-time store employees and about 20% of its full-time hourly workers in the U.S. Most of its in-home advisers and Geek Squad agents will stay on the payroll.
Furloughed employees are eligible for unemployment and Best Buy will cover any company health benefits, including premiums, for at least three months.
"We prolonged this decision as long as we could, working to save as much money in every other area of the company," Barry said. "We halted all travel and hiring, renegotiated every contract we could and worked with our vendors on more favorable terms."
Furloughed employees will be paid through Saturday. The company had continued to pay workers the past few weeks even as many of them had no hours after Best Buy moved to a curbside-only model.
The company said Wednesday that its foundation has also partnered with Dick Schulze, the retailer's founder, to establish a $10 million employee assistance fund to help workers financially hurt by the pandemic.
Other cost cuts include suspending Best Buy's 401(k) matching program, reducing promotional and marketing spending and lowering capital expenditures.
Some corporate employees also will be taking voluntary furloughs or have opted to reduce their hours and pay. Best Buy did not say how many headquarters employees have chosen to do so.
"The situation remains very fluid, and there is still a great deal of uncertainty, particularly as it relates to depth and duration of store closures and consumer confidence over time," Barry said in a statement on Wednesday.
Best Buy has been deemed "essential" and allowed to remain open during stay-at-home orders in nearly every part of the country except New Mexico and Puerto Rico, said Carly Charlson, a Best Buy spokeswoman.
Still, Best Buy decided to close its stores to foot traffic on March 22, limiting purchases to curbside pickup, as a safety measure for employees and customers. It also has voluntarily closed about 40 stores, even for curbside pickup, for at least 10 days in hot spots such as parts of New York and New Jersey.
Best Buy will reopen stores as soon as it's safe to do so, with the timing expected to vary across the country, Barry said.
She added that the company hopes to resume making home deliveries, installations and repairs -- which had been suspended at the same time as stores were closed -- in the "near future." In the meantime, deliveries of items such as refrigerators are being left on doorsteps.
Last month, Best Buy drew the full amount of its $1.25 billion revolving credit facility and suspended all share repurchases.
On Wednesday, the company also said it was lowering its merchandise orders from vendors in some areas as it focuses on essential items in higher demand and is extending its payment terms with some of its key vendors.
It said overall sales were down 5% in the first nine weeks of the quarter, as of April 4.
Best Buy shares fell 7% Wednesday in New York trading.
The company will release its full first-quarter results in late May.
Business on 04/16/2020