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Best Buy Consolidates ‘Centricity’

Best Buy plans to reduce its operations to a single customer centricity operating model by the end of its current fiscal year in a “reorganization and restructuring” designed to enhance efficiencies and reduce costs.

In a conference call, president/COO Brian Dunn said the new structure would span from corporate headquarters to store-level operations, and would help eliminate redundancies that resulted when the customer centricity initiative was layered over existing operations during its launch.

The changes were felt first at headquarters, here, where 300 of the campus’ 4,200 employees received pink slips last week. Dunn had indicated that “corporate and field leadership structures” would be affected first during the current quarter, as management seeks to trim some $300 million in expenses over the next 12 months.

During the conference call, chief financial officer Darren Jackson acknowledged that Best Buy would face one-time severance and reorganization costs during its 2008 fiscal first quarter. “We’re taking out fixed costs,” he said.

The effort reflects the higher cost of customer centric store operations — a point not lost on Wall Street — and the company’s goal of achieving 7 percent operating margins within the decade.

Elsewhere during the call, which followed the release of Best Buy’s fourth quarter earnings (see p. 1), the company announced plans to open upward of 80 new flagship stores this year, add 200 Magnolia Home Theater in-store shops for a total of 300, and offer Best Buy for Business services at 120 more locations.

Separately, the company closed one of its three eq-life health-and-wellness concept stores due to poor performance.

Best Buy said it plans to open China’s first Best Buy-branded store in the Xu Jia Hui area of Shanghai, the city’s premier shopping district. The 86,000-square-foot store will occupy four floors of the Jiang Shan Building, and is expected to open later this year.