Future Shop closure has cost Best Buy $191M so far, and more to come
Electronics retailer Best Buy said closing half of its Future Shop stores in Canada and converting the rest into Best Buys has cost $191 million so far, and could cost another $90 million down the line.
The U.S.-based chain revealed that data in its quarterly earnings report before stock markets opened on Thursday.
In March, Best Buy closed 66 Future Shop stores and converted another 65 into Best Buy locations in a bold move to shake up its operations in a tough retail environment. Shortly after, the company rejigged its online offerings and announced a plan to start selling goods from other stores on its website.
The company says it is confident those moves will pay off down the line, but they're a hit to the bottom line at the moment. "This consolidation is expected to have a material impact on all of the Canadian retail stores and the website on a year-over-year basis," the company said, announcing that it would no longer include the Canadian number in its international sales data until the conversion is finished, because they won't be fair comparisons.
Best Buy says it has already spent $191 million on things like employee severance, getting out of leases and just generally writing down the value of some of its Canadian assets. In its earnings report the company said it expects most of the final costs have already been accounted for, but there could be another $10 to $90 million in costs down the line related to the Future Shop shutdown.
The company says its profit rate from international operations dipped to 21.6 per cent during the quarter, and that "decline was primarily due to the disruptive impacts from the Canadian brand consolidation and increased promotional activity in Canada."
On the whole, the Canadian numbers were nothing more than a footnote on the chain's overall results. Revenue was $8.56 billion and net income fell to $129 million. Both figures were lower than they were a year ago, but both were also better than what analysts had been expecting.