Business

Battered Best Buy’s big boxes too darn big

Best Buy has too many stores, and they’re too big.

That’s the grim reality the world’s largest electronics chain is finally waking up to as fierce competition from Apple and Amazon forces it to shutter locations and test smaller formats.

Looking to avoid the fate of rival Circuit City, which closed its doors in 2009, the struggling retailer said it’s closing 50 of its 1,100 stores — a move that many critics called long overdue and some called too little, too late.

“We’re clearly going to have more doors and less square footage,” Best Buy CEO Brian Dunn said yesterday, laying out plans to slash $800 million in costs and use the savings for training sales associates.

In the quarter ended March 3, Best Buy swung to a loss of $1.7 billion from a year-earlier profit of $651 million. Revenue rose 3 percent to $16.63 billion, but sales at stores open at least 14 months fell 2.4 percent.

Best Buy shares plunged $1.85, or 7 percent, to close at $24.77.

A key problem, analysts say, is that shoppers increasingly are using Best Buy’s cavernous stores as showrooms, checking out big-screen TVs, digital cameras and laptop computers before heading home to order them on Amazon.

In response, Best Buy is testing smaller formats in Minneapolis and San Antonio and is rapidly expanding its chain of Best Buy Mobile cell-phone stores.

As it slashes prices aggressively to steal away customers, Amazon continues to enjoy the benefit of tax-free sales in many states.

A still bigger advantage for Amazon is that it doesn’t have to pay rent on a fleet of oversized stores.

Meanwhile, demand for Apple products is making the hodgepodge of less-desired brands that litter Best Buy stores seem increasingly irrelevant. That’s partly because Apple gadgets, like iPhones and iPads, also function as computers, digital cameras and TVs.

“We are concerned that a turnaround of this magnitude will further weaken Best Buy and increasingly distance it from its vendor partners and core customers in an already very precarious environment,” said Oppenheimer analyst Brian Nagel.