July 12, 2007 | By Tom LeBlanc

Best Buy to Close Six Stand-Alone Magnolia Audio Video Stores
Company says it doesn't plan to close the remaining 13 stores and will keep its over 300 Magnolias operating inside of Best Buy stores.

Best Buy informed employees yesterday that it’s closing six of its specialty consumer electronics Magnolia Audio Video stand-alone stores, according to Sue Busch, director of corporate public relations. It will close four stores on August 4 and two on September 1.

The change, Busch says, is part of a “long-term transformation strategy” toward focusing less on stores and more on the relationships between salespeople and customers. It has to do with “our desire to transform the model to become a more service-oriented provider.” At this time, Busch says Best Buy won’t explain how closing the stores supports that goal because the strategies are still in development. “The timing is not right,” she says.

The employees at the six stores will not necessarily be laid off, Busch says. “The jobs are going away, but the restructuring will provide them with the opportunity to seek new positions within the organization.”

Best Buy does not plan to close all of its remaining 13 stand-alone Magnolia Audio Video stores, according to Busch. She says the standalone stores do have a place in the long-term transformation strategy. Meanwhile, Best Buy will continue to operate Magnolia Home Theater stores within over 300 Best Buy flagship stores throughout the country.

Magnolia is a specialty store under the Best Buy umbrella that the company says offers customers premium products and services, home installation, mobile installation and an in-house service department. Best Buy acquired Washington-based specialty consumer electronics retailer Magnolia Audio Video in 2000 and has leveraged the store’s brand and sales approach by maintaining both standalone Magnolia Audio Video stores and Magnolia Home Theater stores within Best Buy flagship locations.

The Richfield, Minn.-based company recently announced its first quarter ended June 2 earnings and reported net earnings of $192 million, down 18 percent from $234 million in the first quarter of the previous year. In total, Best Buy reported higher revenue ($6.7 billion, up nearly 9 percent), but modest comp-store sales (up only 1.7 percent vs. 4.6 percent).

The announcement of six Magnolia Audio Video stores closing is in no way related to the recent fiscal announcements, Busch says. “[The closings] are part of long-term, big-picture goals we’ve been developing for some time.”
During the first quarter, Best Buy opened 30 flagship locations, closed five Geek Squad stores (leaving seven) and shut down one Magnolia. With the six recently announced closings, 13 Magnolia Audio Video stand-alone stores will be left.
“Our first-quarter results fell short of our expectations. Strong revenue results from lower-margin products significantly cut into our gross profit rate,” said Brad Anderson, vice chairman and CEO of Best Buy, in a statement following the fiscal announcment. “Yet our customers continued to increase our market share. Our share gains, combined with other indicators we see, show that our core business is healthy.”

The store closings break down as follows: Closing at the end of business on Saturday, Aug. 4 are the locations at Arden Fair, Calif.; Clackamas, Ore.; Colma, Calif. and Torrance, Calif. Closing at the end of business on Saturday, Sept. 1 are Silverdale, Wash. and Tacoma, Wash.