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    uy will shift toward mobile sales and smaller stores in an effort to boost sagging revenue and compete with rivals like Amazon and Wal-Mart. Best Buys signature big box stores will be dialed back, and 50 will close in 2012, the company said this morning.
    Thought some might find the article interesting:

    The worlds largest consumer-electronics retailer will test the new store models in San Antonio, Texas and St. Paul, Minneapolis. The renovation would reduce store square footage by 20%, and should be finished by next Christmas. Those new so-called Connected Stores will focus on selling cell phones, tablet computers and e-readers, as well as service plans not offered by Amazon and Wal-Mart. Best Buy employees in these new stores are expected to show customers how to connect electronics in the home.

    Meanwhile, Best Buy will open another 100 smaller mobile-only stores in fiscal 2013. By 2016, the retailer expects to operate some 600 to 800 mobile-only stores, up from 305 today.

    The retailer will make $800 million in cost reductions by fiscal 2015, including some $250 million in the next fiscal year. This will mean $300 million from domestic retail stores. It will also try to trim its corporate structure, cutting 400 positions, to hopefully save another $300 million. Tweaks to the supply chain should yield the final $200 million.

    We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices which will help drive revenue, CEO Brian Dunn says in a statement this morning. And, over time, we expect some of the savings will fall to the bottom line.

    Best Buy shares plunged 8.1% to $24.47 in early morning trading today.

    Best Buy is locked in a tight race for customers and has seen sales slip in recent years. Critics have noted that its expansive, attractive stores have essentially become showrooms for online retailers like Amazon: Customers go to Best Buy to see a product, and can quickly use a smartphone to find a cheaper price online. This has led to six straight quarterly declines at stores open at least 14 months, including a 2.4% dip last quarter.

    Other rivals include retailers like Target and eBay.

    Cutting costs can mean new aggressive pricing tactics, directly taking on those rivals, says Morningstar analyst R.J. Hottovy. In all, the plan is an important step in the right direction, he says, Though it remains unclear whether they are sufficient enough to curtail and reverse recent market share losses or whether the company needs to evaluate even more aggressive cost-cutting measures to stay competitive.

    The plan already started to take form last fall, when Best Buy bought out U.K.-based Carphone Warhouses stake in a joint mobile-store venture for $2.6 billion.

    That acquisition, along with a write-off of Best Buy Europes goodwill and charges from shuttering 11 U.K. big box stores, weighed on Best Buys profit last quarter. It lost $1.7 billion or $4.89 a share.

    Excluding those charges, Best Buy easily beat Wall Street expectations. It earned $2.47 per share, a 25% increase from a year ago. And while revenue rose 3% to $16.7 billion, it fell short of expectations. Analysts expected Best Buy to earn more than $17 billion.

    Reach Abram Brown at abrown@forbes.com. Or follow him @abebrown716.

    See Also: Why Best Buy Is Going Out Of BusinessGradually

    Death Of Best Buy's Big Box Store? Company Will Shift To New Model, Close 50 Existing Stores - Forbes
    03-29-12 12:21 PM
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