Questioning The Wisdom Of Best Buy’s Latest Round Of Lay-Offs

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laid off an unspecified number of employees at stores across the country in what is widely seen as a cost-cutting measure after the chain lowered its annual sales and profit forecasts last month.

Best Buy lowered its guidance for the second quarter last month. The company now expects same-store sales to fall 13 percent, compared to a 19.6 percent increase in the same period last year. Management expects operating income for the year to be around four percent. The previous forecast projected results in the range of 5.2 to 5.4 percent.

In an online discussion last week, some of the experts on the Retail Wire BrainTrust questioned whether layoffs were really the best move for Best Buy.

“While I don’t support the idea of ​​a company being charitable and employing nonessential staff, one has to wonder if they’ve looked closely at another part of the company beforehand,” wrote international economics professor Gene Detroyer. “Here’s my question: when operating profits went up 20 percent, did they hire new people? Unlikely. A 20 percent increase from today’s 13 percent drop two years ago still gets them positive results. Maybe the pressure for profit has nothing to do with the workers on the front lines.”

“Are they looking ahead to the holiday season and wondering if at this time they can hire and train additional staff to be effective/productive versus the ongoing cost of retaining existing staff?” wrote Ricardo Belmar, thought leader for transformation of retail. “It’s odd that they’re downsizing right at the end of the back-to-school season.”

“It hurts morale, in-store relationships and can spoil the overall customer experience,” wrote David Spear, senior partner, industry consulting, retail, CPG and hospitality at TeradataOT
. “Management should do everything possible to curb spending in other areas of the company before cutting jobs, but for most companies downsizing is the norm. Unfortunately, given the current financial momentum we are seeing in the market, there will be more positions on the line before the end of the year.”

The retailer did not quantify the number of workers who would be affected by the action when responding The Wall Street Journalwho broke the story, and other media.

“We are constantly evaluating and developing our teams to ensure we are serving our customers,” Best Buy said in a statement. “In an ever-changing macroeconomic environment where customers are shopping digitally more than ever, we have made adjustments to our teams, which includes eliminating a small number of roles.”

some on Retail Wire BrainTrust accepted this justification.

“Down 13 percent after rising almost 20 percent?” wrote Jeff Sward, founding partner of Merchandising Metrics. “Of course they cut the payroll. Retailers have to adjust to the terms of business, both up and down. The real question is how and with what transparency and humanity.”

“Best Buy’s job cuts, which follow a prior warning that sales have been slowing, is another example of a retailer adapting to a new demand environment,” wrote Neil Saunders, managing director at GlobalData.

Following the forecast, Best Buy said it “will continue to actively explore other measures to manage profitability going forward.” The reporting does not indicate whether the recent job cuts are part of these measures or whether they were included in the chain’s plans at an earlier stage.

The previous round of cuts at Best Buy did not go down well with employees. The company, which was widely praised for looking after its employees early in the pandemic, came under criticism after laying off store employees at a time when government economic controls and changing consumer behavior were working in its favour.

The chain’s own employees criticized a lack of transparency regarding layoffs and other measures, such as B. the reduction of working hours. Morale took a hit when staff who had been lauded for their work during much of the pandemic were caught off guard by the move. That diary The layoffs reportedly became known internally as “The Snap,” a reference to the Thanos character in Avengers: Infinity War, who wiped out half of all life in the universe with a snap of his fingers.

As Best Buy begins another round of layoffs, some on the Retail Wire BrainTrust pointed out that anticipating and correcting morale problems should be a top priority.

“To ensure current sales levels are not overly impacted by low morale (there’s no escaping it), retailers need to take a holistic view of stores and their employees,” wrote Joan Treistman, president of the Treistman Group. “What can retailers do to motivate their current employees? Perhaps employees don’t want to hear about the “why” for cutting frontline workers. However, they will be interested in ‘how’ the retailer makes sure they aren’t looking over their shoulder all the time, but instead focus on the customer and the sale.”

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