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

Best BuyBBY
is laying off an unspecified number of associates in stores across the country in what is widely seen as a cost-cutting move after the chain last month lowered its annual sales and profit forecast.

Best Buy last month cut its forecast for the second quarter. The company now expects that its same-store sales will fall 13 percent compared to a 19.6 percent gain during the same period last year. Management projects that its operating income for the year will come in around four percent. Its previous guidance predicted results in the 5.2 to 5.4 percent range.

In an online discussion last week, some of the experts on the RetailWire BrainTrust questioned if lay-offs are really the best move for Best Buy.

“While I don’t support the idea of a company being charitable and keeping workers they don’t need, one must wonder if they have looked hard at any other part of the company first,” wrote international business professor Gene Detroyer. “Here is my question: When operating profits were up 20 percent, did they hire new people? Not likely. A 20 percent uptick versus today’s 13 percent drop still gets them positive results two years ago. Maybe the profit pressure has nothing to do with the front-line workers.”

“Are they looking ahead to the holiday shopping season and asking themselves if they will be able to hire any additional staff at that time and train them to be effective/productive versus the ongoing cost of keeping existing staff?” wrote Ricardo Belmar, retail transformation thought leader. “It’s curious they are reducing staff right at the end of the back-to-school season.”

“It stinks for morale, for in-store relationships and can tarnish the overall customer experience,” wrote David Spear, senior partner, industry consulting, retail, CPG and hospitality at TeradataTDC
. “Management should do everything they can to curb expenses in other areas of the business before eliminating jobs but, for most companies, cutting roles is the norm. Unfortunately, given the current financial dynamics we’re seeing in the market, more jobs will be on the chopping block before end of year.”

The retailer did not quantify the number of workers that would be affected by the action as it responded to The Wall Street Journal, which broke the story, and other media outlets.

“We’re always evaluating and evolving our teams to make sure we’re serving our customers,” Best Buy said in a statement. ‘With an ever-changing macroeconomic environment, including customers shopping more digitally than ever, we have made adjustments to our teams that include eliminating a small number of roles.”

Some on RetailWire’s BrainTrust accepted this justification.

“Down 13 percent after being up almost 20 percent?” wrote Jeff Sward, founding partner at Merchandising Metrics. “Of course they are trimming payroll. Retailers have to flex with business conditions, both up and down. The real question is how, and with what level of transparency and humanity.”

“Best Buy’s job cuts, which come off the back of its previous warning that sales had slowed, is yet another example of a retailer reshaping itself to a new demand environment,” wrote Neil Saunders, managing director at GlobalData.

Following the forecast, Best Buy said that it would “continue to actively assess further actions to manage profitability going forward.” It’s not clear from the reporting if the latest job cuts are part of those actions or if they were in the chain’s plans at an earlier time.

The previous round of cuts at Best Buy did not go over well with employees. The company, which was frequently lauded near the start of the pandemic for looking after its workers, came under criticism after it laid off store associates at a time when federal stimulus checks and changing consumer behavior were working in its favor.

The chain’s own workers took issue with a lack of transparency around layoffs and other actions, such as cutting staff hours. Morale took a hit as associates, who had been praised for their work during much of the pandemic, found themselves blindsided by the move. The Journal reports that layoffs at the time became known internally as “the snap,” a reference to the Thanos character in “Avengers: Infinity War” who erased half of all life in the universe with a snap of his fingers.

As Best Buy embarks on another round of lay-offs, some on the RetailWire BrainTrust pointed out that anticipating and addressing morale issues should be a top priority.

“To ensure that the current level of sales is not overly impacted by low morale (there’s no escape), retailers need to look at the stores and their workers holistically,” wrote Joan Treistman, president of The Treistman Group. “What can retailers do to motivate their current employees? Perhaps staff doesn’t want to hear about the ‘why’ for cutting frontline workers. However they will be interested in ‘how’ the retailer makes sure they don’t keep looking over their shoulder but instead focus on the customer and sales.”