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Best Buy Taking Magnolia In-House, To Shut 7 Stores

2/23/2009 02:00:00 AM Eastern

Best Buy has assumed direct control over its high-end Magnolia Audio Video specialty chain, and will combine it with its in-store Magnolia shops under a new management structure at its corporate headquarters in Richfield, Minn.

As a result of the decision, Magnolia's headquarters and distribution center here are being shut down, along with seven of its 13 stores.

The status of Magnolia's present management team was not disclosed.

Best Buy said it remains committed to aggressively growing and expanding the Magnolia brand, and will proceed with plans to open a Magnolia store in Chicago this year, while all of the company's Magnolia Home Theater in-store shops will remain open.

However, the company is creating a streamlined operational structure that combines the freestanding stores and in-store shops under one realigned corporate umbrella, and is establishing a new management structure to run it. Members of the new management team have not been publicly announced.

Going forward, Magnolia's supply chain operations will be transferred to Best Buy's distribution facility in Renton, Wash., and custom-installation teams at the six remaining stores are being reorganized into a centralized services model, resulting in headcount reductions.

The remaining installers will be based in regional centers in Los Angeles, San Francisco and Washington State.

Best Buy said the new structure is more efficient and cost-effective, and will better position the brand to deliver its premium product line to high-end home-theater customers.

Best Buy spokeswoman Sue Busch said in a statement, “The store closings, while painful, are necessary to bring Magnolia's expenses in line with lagging home-theater sales.” The affected stores are slated to close by the end of the month.

All jobs at Magnolia headquarters are being eliminated, although new positions will be created at Best Buy headquarters, creating possible opportunities for current staff.

“We remain confident in the strong potential for Best Buy and all of its brands in the U.S. and around the world,” Busch said. “The decision announced today will enable the company to survive these difficult times, and thrive when the economy improves.”

Magnolia Stationers and Camera Shop was founded in 1954 in Seattle by Len Tweten. Best Buy acquired the company — by then a 13-store Northwest A/V specialty chain called Magnolia Hi-Fi — from Tweten's son Jim in 2000 for $87 million. The younger Tweten retired last year as CEO.

The chain, since renamed Magnolia Audio Video, has been struggling in recent years, with Best Buy having reported consecutive quarterly comp-sale declines.

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