Popular Technology Retailer Closing Dozens of Stores

While Covid hurt malls and clothing retailers, it was a boom time for furniture chains, home improvement retailer, at-home exercise equipment sellers, and electronics retailers.

People were stuck at home due to social distancing efforts and that forced them to make changes. Some people built home offices, while others added Peloton bikes, and others simply bought a nicer couch since they were sitting on it so much more.

Electronics retailer saw demand pull forward. In a normal multi-year cycle, it's somewhat easy to predict when people might replace their electronics.

A certain percentage of people get a new phone every year, while most replace their laptop on 3- to 5-year cycle. That cycle accelerated when people needed to use their home computer setup to work on a daily basis.

That was good for retailers including Best Buy (BBY) , but also causes problems down the road. Yes, maybe I bought a couple of new laptops, webcams, and top-quality mics for myself, my wife, and son, but that meant I would likely not need to replace those items for a few years.

For Best Buy, the traditional cycle was broken, and changing work and commuting needs post-pandemic made some of its stores less necessary.

The company has responded by steadily cutting large-format stores, while also testing newer, smaller locations, and adding outlet stores.

Best Buy has shut down some of its large-format stores.

Image source: Shutterstock

Best Buy has been closing stores

Best Buy's store closings started as a trickle, before picking up in 2023.

In addition to closing up to 30 stores in 2023, CEO Corrie Barry said the chain planned to reduce showroom space and expand its backend capabilities at some locations.

“Our stores have multiple purposes now and a larger backroom provides better support for other capabilities like our high rate of in-store pickup of online orders. In addition, we see significant opportunities to leverage these larger store warehouses and our supply chain expertise to help our vendor community fulfill a larger portion of their direct-to-consumer channel,” said Barry, RetailDive reported.

The company also shared plans to shut down a significant number of stores.

“We are on track to deliver the fiscal '24 store plans we announced this past March. These include closing 20 to 30 large format stores, implementing eight Experience Store remodels, and opening around 10 additional outlet stores,” Barry said during the first-quarter 2024 earnings call.

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The chain expected to continue closing stores through the end of 2025.

“As our ongoing practice, we will continue to close existing traditional stores during our rigorous review of stores as their leases come up for renewal,” CFO Matt Bilunas said during the chain's fourth quarter 2024 earnings call.

“In fiscal '24, we closed 24 stores. And in fiscal '25, we expect to close 10 to 15 stores.”

Best Buy store closure timeline:

2021, February 27: Best Buy closed a location at Westgate Mall in Brockton, Massachusetts, as part of a broader plan to shutter five stores nationwide.
2022, fall: Best Buy closed its Upper West Side (NYC) store on October 30 and its Riverbank, California, location on October 29.
2023, late January: Best Buy announced plans to close 20 to 30 large-format stores as part of its annual lease-review strategy.
2023, March 4: Best Buy closed approximately 17 stores in one week.
By early 2023: Best Buy had shut about 70 large-format stores over the past three years, amounting to a 7% reduction in its store footprint.
2024, FY 2024 (covering early 2023-early 2024): Best Buy closed 24 stores.
Early 2024 (FY 2025 guidance period): The company projected it would close 10 to 15 additional stores.
2024, October 26: The Gaithersburg, Maryland, store closed permanently after over 30 years in operation.
2025: For FY 2025 (ending March 2025), Best Buy planned to close 10 to 15 more stores, per the guidance shared by the CFO.

Source: Best Buy

Best Buy plans in-store changes, more closures

Barry made it clear during the Q4, 2024 earnings call that Best Buy was taking a relentless approach to evaluating and improving its stores.

Our capital investments for fiscal '25 are concentrated more on existing store updates and refreshes and less on major remodels or store openings. We plan to touch every single store in the chain in some fashion, improving both our merchandising and ease of shopping for customers.

This includes improving and livening the merchandising presentation given the shift to digital shopping and corresponding lower need to hold as much inventory on the sales floor. It also includes rightsizing a number of categories to ensure we're leveraging the space in the center of our stores in the most exciting, relevant, and efficient way possible.

Best Buy will also continue to evaluate each store and whether it should remain open.

“As our ongoing practice, we will continue to close existing traditional stores during our rigorous review of stores as their leases come up for renewal, Bilunas said.

Barry also highlighted that stores that remain open will get a refresh.

“We're not remodeling every store in the fleet. So, I have to be clear there. But what we are doing is taking, I would argue, kind of a stronger position than we ever have to ensure that the shopping experience reflects that kind of excitement and that sparkle that technology brings to life,” she added.

Wedbush Analyst Seth Basham believes Best Buy is on the right track.

“There are building signs of stabilization in consumer electronics, with laptop and TV unit sales again increasing for [Best Buy] in 4Q, 24, and replacement and innovation cycles likely to build from here,” said in a note to customers.