MINNEAPOLIS — Best Buy will lay off employees at its corporate headquarters next month following a tepid response to an earlier buyout offer.
According to a report by the Minneapolis Star Tribune, an unknown number of workers will be downsized on Feb. 19. The employees will receive six months’ pay and benefits on average, as opposed to the 7.5 months of pay and one year of benefits provided to the 500 workers who accepted the
. Those staffers, who represent about 13 percent of Best Buy’s 4,000 corporate-level employees, are scheduled to leave on Feb. 12, the newspaper said.
A company spokesperson told the Star Tribune that new jobs will likely be created as part of the “overall process of realigning resources,” and that some employees might be eligible for different jobs at headquarters.
Workers were informed of the layoffs today by email and in meetings, the newspaper said.
Vice chairman Brad Anderson signaled the possibility of layoffs in December and announced plans to cut capital spending in half amid what he described as “the most challenging consumer environment our company has ever faced.” The moves came in the wake of a 77 percent drop in fiscal third-quarter net earnings to $52 million and a 5.3 percent decline in same-store sales worldwide.
Word of Best Buy’s layoffs coincided with Target’s termination of 9 percent of its headquarters workforce to cut costs and boost earnings amid the weak sales environment. The mass merchant also plans to close a distribution center in Arkansas later this year.
Target’s layoffs affected about 600 corporate-level employees and eliminated 400 open positions, while the closure of the company’s Little Rock distribution center will result in the loss of 500 jobs.
“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions to ensure Target remains competitive over the long-term,” president/CEO Gregg Steinhafel said in a statement.
In addition to workforce reductions, the company has also suspended salary increases for senior management, reduced new store openings, tightened its credit card policies, and is cutting corporate operating expenses including outside contractor support and travel and entertainment.
Target said it took the actions to bolster earnings squeezed by months of weaker-than-expected sales, and in anticipation of “continued difficult economic conditions well into 2009.”
Target’s affected headquarters employees will continue to receive full pay and benefits through April 1, after which they will receive a comprehensive separation package based on their years of service that includes 12 months of continued health care, Target said. Little Rock employees will be offered positions at other distribution centers or will receive comparable severance.
As a result of the restructuring, Target expects to record a charge of approximately 3 cents per diluted share, mostly in its fiscal 2008 fourth quarter, but expects that the resulting annualized benefit will exceed the charge.