Best Buy will hire fewer seasonal employees for this year's holiday stretch as wary consumers and competition weigh heavily on the company's business.
Speaking to Reuters in an interview published yesterday, Best Buy CEO Brian Dunn said that his company plans to hire 15,000 seasonal workers this holiday season, down from the 29,000 the retailer hired last year. Permanent employees will be asked to work overtime to make up for the lost hours, Dunn said.
"The consumer is being really careful about where he or she is spending the dollars, and I think that will continue through the holidays," Dunn said.
Consumer demand is becoming an increasingly worrisome problem for Best Buy. Earlier this month, the company announced its fiscal second-quarter earnings, revealing that it generated a profit of $177 million, or 47 cents per share, on revenue of $11.34 billion. Wall Street expected the firm to post a profit of 53 cents per share during the period. Last year, the company's second-quarter earnings per share hit 60 cents.
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In addition, Best Buy this month was forced to cut its forecast for the rest of its fiscal year, saying that it will likely generate between $51 billion and $52.5 billion in revenue, and expects same-store sales to either match last year's figure or be down up to 3 percent.
That performance is causing some analysts to revise their views on Best Buy's business model. Earlier this month, Wedbush analyst Michael Pachter said that Best Buy's brick-and-mortar business is becoming outdated, and consumers are voting with their wallets to prove that point.
"Best Buy's strategy of focusing on premium products at higher price points backed by a strong service offering is becoming outdated due to comparison shopping and the changing perception of consumer electronics," Pachter wrote in a note to investors. "Although Best Buy remains the best available physical location to view new items from a variety of product lines and manufacturers, it is not necessarily the least expensive place to buy them. In-store comparison shopping through smartphones makes differences between Best Buy's prices and those of its lower-priced competitors more apparent."
Pricing has long been the thorn in Best Buy's side. In many cases, consumers looking to buy everything from a television to a video game can find better pricing online. So, as Pachter says, some folks are simply going to Best Buy to see what they want, and then heading home to order the device online for a reduced price.
According to Reuters, Dunn acknowledged the importance of pricing in the marketplace, and said that Best Buy will match lower prices at competitor stores between November 13 and December 24. However, the price-matching only applies to deals at other brick-and-mortar stores, like Wal-Mart, and will not be available between Thanksgiving Day and "Cyber Monday."