Best Buy fired at least several hundred workers recently. It is either a sign of a slowing economy, or an admission that its business model is flagging. Either way, it is not good for the future of Best Buy workers, or investors.
The Wall Street Journal made two points about the layoffs. The first is that workers can apply for better jobs at Best Buy. It is a fair guess that not all of them will be reemployed. The second point is that as Best Buy’s sales move online, it needs fewer people.
The online part of the argument depends on Best Buy’s ability to compete with other online retailers. The company is up against Amazon.com which has much larger ecommerce revenue and Apple. Best Buy sells Apple products, so the question is where do people buy iPhones and Macs.
Best Buy shares have taken a brutal beating this year compared to its online competitors. It is a sign that Wall Street thinks Best Buy cannot effectively compete. Its shares are down 9% in 2023. Shares of Apple are 27% higher. Shares of Amazon are up 22%. Perhaps a better way to make the comparison is that Best Buy’s market cap is $16 billion. Apple’s is $2.6 trillion. Amazon’s is just above $1 trillion. Those numbers, by themselves, tell a horrible story for Best Buy. (This is the biggest US company the year you were born.)
Best Buy has stumbled and bumbled trying to put up a fight against Amazon for years. A longer term look at stock prices shows that Best Buy’s shares have risen 3% in five years. Amazon’s are up 43%. Apple’s are up 279%. To make matters worse, the Nasdaq is higher by 70% over the same time frame.
Best Buy has been a terrible investment. Firing people won’t change that. The company is irreparably broken. (These are America’s worst retailers.)
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