Best Buy Profit Down, Offers Staff Buyouts
Richfield, Minn. Facing what CEO Brad Anderson called the “most challenging consumer environment our company has ever faced,” Best Buy announced Tuesday that its third-quarter profit fell 77% to $52 million in the three months ended Nov. 29. That’s down from $228 million a year ago.
The company added that it will offer buyout packages to nearly all its corporate employees in an effort to cut costs.
Best Buy said it also plans to cut capital spending by 50% in 2009 and open “significantly” fewer stores in the United States, Canada and China.
Revenue rose 16% to $11.5 billion from $9.93 billion last year. Analysts expected revenue of $11.09 billion. Same-store sales fell 5.3% during the quarter.
Anderson said in an effort to cut costs, nearly all corporate employees are eligible for a voluntary buyout package, which offers a “significant” increase in the company’s base severance offer. Layoffs may be required depending on how many staff take the buyout deal.
Best Buy said it expects same-store sales will fall 1.0% to 5% for the year.
Target goes Thai with new designer
In one of the more highly anticipated launches of its GO International Collection, Target next week will introduce a new line of swimwear and apparel from Thakoon Panichgul.
Born in Thailand and raised in Omaha, Neb., since the age of 11, Panichgul is a designer who burst on the fashion scene in 2004, and quickly rose to prominence in fashion circles. He gained notoriety this fall when Michele Obama wore one of his dresses as she shared the stage with her husband after his acceptance speech at the Democratic National Convention. The dress she wore that evening cost upwards of $1,000, and Panichgul’s other designs cost even more at retailers such as Neiman Marcus and Saks Fifth Avenue. Prices at Target will range from $16.99 to $44.99.
“Thakoon Panichgul is an extraordinary design talent with a keen eye, whose brilliantly priced collection is sure to please our guests,” said Trish Adams, senior VP at Target. “His silhouettes are trend-forward with an urban femininity, providing chic looks at a great value.”
GO International is a program squarely aligned with Target’s “expect more, pay less” brand promise, as it provides customers access to exclusive product created by well-known designers for a fraction of what they would pay in high-end department stores. The product offering also brings excitement, newness and a sense of urgency to the apparel department, since the collection only is available for a limited time.
Prior to Panichgul, Target partnered with American designer Richard Chai, whose designs were offered throughout August. And in October, it was Scottish-born designer Jonathan Saunders whose limited edition designs were found in Target.
According to the company, its newest line, called Thakoon for Target, provides a contemporary take on classic resort must-haves, with stunning graphic prints and a colorful palette.
KB’s loss could be Target’s gain
As one of the nation’s largest toy retailers, Target is poised to benefit from the demise of KB Toys, as the toy specialist’s filing for Chapter 11 will likely result in the elimination of toy selling capacity.
KB Toys became the latest retailer to fall victim to the difficult economy when it filed for Chapter 11 bankruptcy protection following a significant drop in sales at its 277 stores. The retailer reported that same-store sales from the period between Oct. 5 and Dec. 8 fell nearly 20%. In its filing in U.S. Bankruptcy Court in Delaware, KB stated that it had debts between $100 million and $500 million and total assets in the same range.
The company said that it plans to close all of its stores and begin liquidation sales in the middle of the holiday season.
Back in January 2004, KB filed for reorganization under Chapter 11 after a dismal holiday selling period, only to later to emerge from bankruptcy in August 2005. This time around, the retailer isn’t waiting to see how the holidays turn out. Though the season is a critical time for most toy retailers, according to The NPD Group, toy sales are expected to be flat or down slightly from last year, so KB isn’t holding its breath.