Best Buy saw increased demand in March as people bought freezers, computer monitors and other items to use for their stays at home during the pandemic, but the company said it's now made the same decision as many other retailers: It's furloughing thousands of employees and taking other cost-cutting measures.
Starting Sunday, Best Buy will furlough about 51,000 employees, the company said Wednesday. The decision will impact nearly all of its part-time store employees and some of its full-time store employees in the U.S., according to a news release. About 82% of its full-time employees who work in stores or in the field, such as the Geek Squad employees, will continue to be paid.
Best Buy's shares were down about 7% early Wednesday afternoon. Best Buy shares, which have a market value of $16.8 billion, are down 25% since the start of the year.
Best Buy is one of the many U.S. retailers who have had to adapt and make tough decisions as the pandemic disrupts customers' lives and changes their behavior. Since March 22, the company's stores across the country have been closed and it has suspended all in-home delivery, installation and repairs. It has continued to offer curbside pickup at its stores.
Initially, Best Buy continued to pay its employees, but as the disruption drags on, it will stop paying those who will be furloughed. It will continue to cover the total cost of their health benefits and pay their tuition reimbursements for at least three months, according to a news release.
Best Buy saw a sales surge as the pandemic sparked demand for items that help people work from home, students attend school remotely and families stockpile and cook larger quantities of food. During an eight-day period that ended March 20, its sales were up by about 25% as people bought computers, kitchen appliances and more. The company's quarterly sales through March 20 grew by about 4%, exceeding the company's expectations for the period.
In recent weeks, however, Best Buy's sales have dropped off. The company said it's seen more demand for some items, such as gaming devices, but has had a sales decline of 30% since March 21.
In a video message posted Wednesday, CEO Corie Barry said company leaders have focused on three goals: serving customers in a safe way, keeping as many of its workers employed as possible and setting up the retailer so it's "well-positioned to thrive in what will almost certainly be a new and very different environment." She touted the strength of Best Buy, noting that the company has retained about 70% of its sales compared with last year, even though customers have not set foot in stores and crews haven't been going to homes for several weeks.
She said online sales in the U.S. are up more than 250%, and about half of those sales are picked up at its stores.
"We believe our mission is to enrich lives through technology," she said in the video message. "And that has never been more vital than in the dark days of this pandemic and in the weeks and months ahead as people literally work, learn, cook, entertain and most importantly, connect using the technology in their homes."
Barry said in the video message that Best Buy goes to customers' homes more than a million times in a typical year, but decided to halt that business and do contactless doorstep drop-offs instead because of safety concerns.
"We've learned a great deal since then and we are working to get back into people's homes in the near future," she said.
In addition to the furloughs, Best Buy's top executives, including its CEO, will take pay cuts. Barry will receive half her salary, and company executives who report directly to Barry will take a 20% pay cut to their base salary through at least Sept. 1. The company's board will be paid half of their cash retainer fees during the same period.
In mid-March, Best Buy withdrew its fiscal 2021 financial outlook. It also drew the full amount of its $1.25 billion revolving credit facility and suspended all share buybacks.
The company said it has taken other actions to rein in its budget during the pandemic, including suspending 401(k) matches, lowering capital spending and slashing marketing expenses.
Best Buy said it's creating a $10 million employee assistance fund with the company's founder, Dick Schulze. The fund will help part-time and full-time hourly workers who have been with the company for more than a year. The retailer is repurposing its annual corporate giving budget to contribute to the fund.