The company would not say how many jobs it hopes to cut, but nearly all of the 4,000 employees at its corporate offices are eligible to take the voluntary buyouts.
Best Buy Co. Inc. has joined a growing list of companies in Minnesota and nationwide that are cutting staff to deal with the tanking economy. The Richfield-based company on Monday offered voluntary buyouts to nearly all of the 4,000 employees at its corporate offices, saying it needs to "reduce significant expense from its corporate payroll."
The company would not say how many jobs it was hoping to cut, but employees from hourly wage earners to executive vice-presidents are eligible to take the buyouts, which were sweetened with additional pay depending on age and time of service.
"This isn't just an issue with Best Buy," said Marshal Cohen, chief retail analyst for market research firm NPD Group in New York. "It's a sign of the challenge that retailers are facing as a whole. Holiday numbers aren't coming in and discounts have to be deeper than expected. It makes payroll a very challenging issue."
Best Buy, the nation's largest consumer electronics company, is struggling along with the rest of the economy as turmoil in the financial markets and a lingering housing slump have brought consumer spending to a screeching halt.
Sales of discretionary products are particularly dismal, and Best Buy is on the bleeding edge. While the company has the largest selection of televisions, video game systems, cell phones and mp3 players, they've become less profitable as the technology has become more widespread and competitors such as Wal-Mart, Target, Sears and Macy's stock similar goods.
In November, Best Buy executives described its falloff in sales as "rapid" and "seismic" and said sales could decline by as much as 15 percent by February.
Black Friday wasn't much of a boost, either. During the week of Nov. 23 to 29, which included the busy day-after Thanksgiving sales, consumer electronics sales declined 8.4 percent, according to NPD Group's weekly point-of-sales data.
Though it rarely releases monthly sales data, Best Buy warned investors that sales in stores open more than a year plunged 7.8 percent in October, after a drop of 2.4 percent in September.
A company spokeswoman declined to say whether Best Buy hoped to achieve a set dollar amount in savings from staff reductions or whether there would be involuntary layoffs if not enough people sign up. Employees have until Jan. 5 to make decisions.
Store employees and those working outside the United States were not included in the package. Best Buy has about 165,000 employees worldwide.
Several employees said they were frustrated by a lack of detail about the buyouts, which were announced in a series of department meetings.
An average salaried employee would get 7 1/2 months of pay plus one year of both heath and life insurance. Employees whose age and years of service equal 60 or more would get a year's salary plus health and life insurance.
Spokeswoman Susan Busch acknowledged that the details were complex, and said "more context" would be provided this morning when Best Buy announces its quarterly earnings report. According to Bloomberg news, analysts expect third quarter earnings of about 23.5 cents per share compared with 53 cents per share in the year-ago period.
Busch said the company already has taken cost-cutting steps and indicated there could be additional steps to trim costs. "You hate to do these types of things because these are people's lives," Busch said. "Tough choices sometimes have to be made to make sure the organization can continue to survive and to thrive on the other side of this economic downturn."
Since November, half a dozen Minnesota companies have announced layoffs of 50 or more people, including up to 1,100 at Hutchinson Tech; 2,300 worldwide at 3M, and 200 at Entegris Inc. and Lawson Software.
Potentially ominous sign
That Best Buy is taking such drastic measures before the crucial holiday season is complete is a potentially ominous sign. Best Buy gets nearly of third of its sales in the fourth-quarter.
But with Circuit City liquidating inventory at 155 stores in recent months and the possibility of more closures coming, many analysts believe Best Buy will eventually gain market share.
And that Best Buy is among the first to announce cuts.
"A lot of stores are going to be thinking of doing this," Cohen said. "When you look at what retailers have the ability to do to cut costs, their hands are tied. You can cut back on merchandise, and they can only do so much of that. It really comes down to employees.''
Jackie Crosby • 612-673-7335