Best Buy has closed 18 stores, but physical locations still key to strategy

From a two-level store along Chicago’s “Magnificent Mile” to a more isolated store in Hutchinson, Minn., Best Buy has closed 18 stores in recent weeks, many of which had their last days over the weekend.

The moves are part of the Richfield-based electronic chain’s annual churn as it re-evaluates its store portfolio as leases come up for renewal and more of its business shifts to online.

A company spokesman declined to give an official tally of the total number of Best Buy store closings in recent weeks, saying the retailer will update its store count when it reports its third-quarter earnings later this month. But he confirmed a list of 18 recent store closures that the Star Tribune gathered from social media and local news accounts from around the country.

While many other retailers are closing stores because they are struggling with declining sales, Best Buy’s business has been fairly robust following an impressive turnaround. Stores — where vendors can showcase their products such as big-screen TVs — have been a key part of its strategy to differentiate itself from Amazon.

Still, Best Buy has been shuttering about a dozen big-box stores a year in the last several years. Some of those stores were opened a little over a decade ago when the chain rapidly expanded as it battled it out with Circuit City, which, of course, ended up going bankrupt in 2008.

Corie Barry, who became Best Buy’s CEO earlier this year, has said the company’s pace of store closures could begin to slow a bit down the road.

“On the flip side, we’re very eyes-wide-open about the continued growth of online and the penetration that continues to grow in our digital business,” she told reporters in September before the company’s investors meeting in New York. “Now the good news is that a lot of our digital business is fulfilled by our physical presence. Fifty percent of what we sell online is either picked up from stores or shipped from it.”

Online sales account for about 16% of Best Buy’s U.S. business.

Barry said she feels good on the whole about Best Buy’s store locations, which tend to be in well-performing strip centers.

But with about 170 leases coming up for renewal a year, she said it gives the retailer an opportunity to close some stores and to move others to better spots.

The company has been relocating about four to six stores a year. Best Buy will likely do more store relocations than adding new stores in the coming years, she added.

Last year, Best Buy opened its first new store in the U.S. in seven years with a location outside of Salt Lake City.

It is also finalizing a lease to open a store in mid-2020 in the new American Dream shopping and entertainment center in New Jersey being developed by the owners of Mall of America and opening in stages. (Best Buy closed its store in the Mall of America last year.)

In addition, Best Buy has been opening a handful of new outlet stores where it sells refurbished and open-box merchandise, including one that recently opened in Eden Prairie.

The electronics retailer now has just under 980 large-format stores in the U.S., roughly a hundred fewer than it had a decade ago.

In addition, Best Buy in recent years has closed all of its 400 or so smaller Best Buy Mobile stores, which were mostly in shopping malls.

Last year, Best Buy closed 11 big-box stores in the U.S. It closed 18 in 2017 and 11 in 2016.

Among the stores closed this year is one at Greendale Mall in Worcester, Mass., where Best Buy anchored what is now a dying mall.

In some cases, it had other stores in proximity or were in shopping areas that had been declining.

As for the Chicago store in the former John Hancock Center in Chicago, the company decided it was not worth it to renew the expensive lease.

“The Michigan Avenue store has one of the highest rents among all of our stores, even higher than most of our stores in Manhattan,” said Jeff Shelman, a Best Buy spokesman. “We saw business from tourists at that location, but our other local customers were more likely to shop one of our other stores.”

Best Buy has three other stores in Chicago and dozens more in the surrounding suburbs.

While many retailers wait until after the holidays to close stores, Best Buy tends to do so right before its busiest season gets into full swing so it can transfer employees to nearby stores that are boosting workforces for the holidays.

“These employees are well trained,” Shelman said. “We want to keep as many of them as we can, and this timing allows that to happen, especially in markets where we have multiple stores.”

Nearly half of the employees from the 18 stores closed in recent weeks have found jobs at other Best Buy stores, he said.