Best Buy Company, Inc., will demote employees and cut positions in an effort to reorganize its stores amid decreased consumer spending—a move that will affect thousands of employees, according to a research report by New York investment firm Sanford C. Bernstein & Company, LLC.
 
In the report, analyst Colin McGranahan said that as many as 1,000 assistant store manager positions will be cut. Additionally, as many as 8,000 senior sales associates will be demoted to regular sales positions that will pay 25 percent to 50 percent less than their previous jobs.
 
McGranahan said the reorganization could result in selling, general, and administrative expense savings of $175 million. However, a Sanford representative cautioned Thursday that numbers in the Best Buy report are estimates based on conversations with company representatives and were not directly provided by the electronics retailer.
 
Thursday morning calls to spokespeople at Richfield-based Best Buy were not immediately returned, but company representatives have told other news organizations that staffing changes are taking place; they did not, however, provide specifics about those changes.
 
According to McGranahan’s report, Best Buy will give demoted sales associates quarterly lump-sum payments equal in size to their pay reductions to ease the transition. But those payments will end after three quarters.
 
McGranahan said that there is some risk associated with the staffing changes, particularly related to negative morale. At a company that has an “associate-centric” approach, the current moves could come as a rude awakening to employees accustomed to substantial advancement opportunities and a more robust labor model.
 
However, “in the current economic environment, cost reduction efforts are widespread, and many associates are likely happy to still have a job at all,” McGranahan said in the report. “The liquidation of Circuit City also reduces the competitive threat and could supply a ready group of replacement associates who would likely be thrilled to work at the lowered rates at [Best Buy].”
 
Best Buy has weathered the economic recession better than many other retailers. Still, it has experienced recent earnings declines. The company reported $570 million in earnings for the fourth quarter ended February 28—a 23 percent reduction from the same time the previous year. Full-year net income totaled $1 billion—down almost 29 percent from the previous year. Full-year net income, however, increased about 13 percent to $45 billion.
 
Five-hundred Best Buy workers took a voluntary severance package that was offered in December to nearly all of the then-4,000 headquarters employees. In February, the company cut 250 positions and added 210 new ones, resulting in a net loss of 40 positions.
 
Despite its recent challenges, Best Buy announced Thursday that it plans to open eight new stores this month and next month. Those stores will be located in Duarte, California; Goleta, California; Woodland, California; Chicago; Kansas City, Kansas; Branson, Missouri; Waynesville, North Carolina; and Kingsport, Tennessee. As of May 30, Best Buy will operate 1,031 stores in 49 states and Puerto Rico.