Best Buy Co. Inc. said Thursday that it is laying off 950 of its Canadian employees, the first major cutback since the electronics retailer reported disappointing holiday sales earlier this month.
The Richfield-based company said the layoffs affected 6 percent of its workforce in Canada and will not result in any store closings. At the end of January a year ago, Best Buy closed 15 stores in Canada. It currently has 265 stores in Canada and had 16,000 Canadian employees before the layoffs.
The move is another sign of retrenchment from the upward trajectory the consumer electronics giant experienced for much of last year.
“We continue to identify opportunities to improve our performance and accelerate our business transformation, and today’s news in Canada is consistent with that goal,” spokeswoman Amy von Walter said.
She declined to say whether there would be layoffs in the U.S., where Best Buy operates 1,983 stores. “Every market is different, and you cannot read anything else into today’s announcement,” Von Walter said.
Throughout 2013, the consumer electronics giant streamlined operations, worked to build sales and create alliances with other technology companies. By November, Best Buy stock had tripled from where it stood less than a year before, briefly exceeding $44 a share.
But perceptions about Best Buy’s momentum shifted on Jan. 16, when it announced that sales for the nine-week holiday period ending Jan. 4 were lower than investors expected. In two days, Best Buy shares dropped 35 percent.
Best Buy’s holiday results reflected deep price discounting and lower-than-expected demand for cellphones. CEO Hubert Joly said one of the firm’s priorities would be “to more quickly and more deeply lower our cost structure.”
In Canada, Best Buy is the leading electronics seller. The company entered the market in 2001 with the purchase of what was then Canada’s largest electronics retailer, a company called Future Shop that had 88 outlets. It has since tripled the size of the Canadian business and continues to use the Future Shop name on some stores.
Doug Stephens, a Toronto-based retail consultant, said Best Buy wasn’t facing any pressures that were unique to its Canadian operations. He said Target Corp.’s entry to Canada with about 100 stores last year likely had only a small effect on Best Buy in the country.
“I think it’s down to Best Buy defining what the future looks like,” Stephens said. “To my mind, the brand has not defined itself enough. They have not said, ‘This is where we’re going to dominate.’ ”
The company’s international unit, which includes Canada as well as a smaller number of stores in Mexico and China, performed better during the holiday sales period than the U.S. operations. Sales at comparable stores — those open at least 14 months — rose 0.1 percent in the international segment while those in the U.S. experienced a 0.9 percent decline.
Going into the holidays, Best Buy executives decided to keep up with what they said was an increasing level of price-cutting and promotions by competitors, both online and with traditional brick-and-mortar outlets. But the discounting turned out to be even greater than anticipated, Best Buy executives said earlier this month.
Stephens said Best Buy’s leaders are facing a strategic question of whether to participate with discount-focused retailers in “a race to the bottom.”
On Thursday, Best Buy shares fell 5.2 percent to $22.72; its first close under $23 since last April 18.
Staff writer Evan Ramstad contributed to this report.