Best Buy will furlough 51,000 store employees in the U.S., or about 40% of its total workforce, as its stores remain closed aside from curbside pickup.
The Richfield-based retailer’s sales were up 4% heading into stay-at-home orders because of the coronavirus pandemic — and surged 25% in one mid-March week as consumers prepared to hunker down and rushed to buy computers, keyboards, webcams and freezers.
But while Best Buy continues to see strong demand for products, it said Wednesday that sales have plummeted 30% in the last month since stores have closed to the public.
CEO Corie Barry said the quick pivot to curbside pickup last month has been a “remarkable success,” helping the company to retain 70% of its sales. Online sales have skyrocketed 250% in that time, about half of which have come through curbside pickup orders and the rest through orders shipped to homes.
“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 salary 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 of time during the pandemic. Department stores and specialty apparel retailers have been hit especially hard.
On Wednesday, the Commerce Department said U.S. retail sales in March dropped 8.7%, the biggest decline it has ever recorded. Clothing stores were hit the hardest, with sales plummeting 50.5%. Sales at restaurants and bars saw a 26.5% decline and a 15.1% drop at electronics and appliance stores.
Experts expect April to be even worse since many stores will be closed all month, whereas many were open during the first half of March.
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.”
Best Buy said Wednesday that its foundation has partnered with Richard Schulze, the retailer’s founder, to establish a $10 million employee-assistance fund to help workers financially affected by the pandemic.
Other cost cuts include suspending Best Buy’s 401(k) matching program, reducing promotional and marketing spending, and lowering capital expenditures.
While not providing specific numbers, the retailer said some corporate employees also will be taking voluntary furloughs or have opted to reduce their hours and pay.
“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.
Best Buy has been deemed “essential” and allowed to remain open during stay-at-home orders in nearly every part of the country aside from New Mexico and Puerto Rico, said Carly Charlson, a Best Buy spokeswoman.
Still, Best Buy decided on March 22 to close its stores to foot traffic, limiting purchases to curbside pickup, as a safety measure for employees and customers. It also has voluntarily closed for at least 10 days about 40 stores, even for curbside pickup, 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.
The company hopes to resume making in-home deliveries, installations and repairs — which had been suspended at the same time as stores closed — in the “near future,” she said. 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. The company will release its full first-quarter results in late May.