The Associated Press March 30, 2012, 4:48PM ET

Best Buy shares fall on restructuring concerns

Best Buy Co.'s shares fell in Friday trading as investors lost patience waiting for the retailer to find the right plan for success.

THE SPARK: Best Buy announced Thursday that it will revamp the struggling chain by closing 50 big box stores, cutting 400 jobs and trimming $800 million in costs. The company, which has about 1,400 U.S. locations, also plans to open 100 smaller, more profitable Best Buy Mobile stores across the country.

The company was once the largest U.S. specialty electronics retailer but fell on hard times after shoppers started using its stores as showrooms where they can test out products before buying them cheaper elsewhere.

Best Buy announced the changes as it posted a $1.7 billion fiscal fourth-quarter loss, which was partly due to restructuring charges. Revenue rose 3 percent, but it missed analysts' expectations. The company also issued a weak sales forecast.

THE BIG PICTURE: Best Buy has tried to make more modest changes to improve its profitability over the past few years but struggled for significant results.

Investors were hoping that cost-cutting overseas and other recent adjustments would begin to benefit the company's bottom line. But Thursday's announcement frustrated them as the company indicated that money would be spent on the new strategy.

THE ANALYSIS: "Change has finally arrived, but so has the pain of implementing it," Jefferies & Co. analyst Daniel Binder said in a note to investors. "For over three years now, we have been waiting for change at Best Buy ... With yesterday's announcements, we think Best Buy has made the first step on a potentially long journey to become more relevant in the marketplace"

Analysts were skeptical that the moves would pay off anytime soon. Binder noted that investment years can often be tough times to make money on a retailer's stock, and he suspects the same from Best Buy.

"The company's message is beginning to sound like an infomercial gone awry, with the catchphrase `but wait there's more' never yielding the results that investors expect," Carris & Co. analyst Scott Tilghman said in his research note.

"The company's checkbook appears to be at the ready to spend away savings for what management presumes is longer-term savings opportunities," Tighman wrote. "That coupled with tempered segment growth expectations leads us to shift to the sidelines for now."

SHARE ACTION: Best Buy's shares opened at $25.36 and closed at $24.77 on Thursday when it announced the changes. They fell $1.09, or 4.4 percent, to close at $23.68 on Friday.


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