Best Buy stock price plunges 6% as retailer furloughs 50,000+ employees

Shares of Best Buy (NYSE:BBY) are trading more than 6% lower today after the retailer announced it will furlough about 51,000 hourly employees, starting Sunday.

Fundamental analysis: Business updates related to novel coronavirus (COVID-19)

Best Buy said it will furlough about 51,000 hourly employees as its stores continue to be closed, following the company’s decision on March 22. These employees will continue to receive health benefits for at least three months.

Following this decision, about 82% of its full-time store employees will continue to be paid. Although all of its stores across the United States are closed, Best Buy says that it has managed to retain around 70% of sales recorded last year as online sales in the U.S. are up more than 250%.

“We are seeing a surge in demand across the country for products that people need to work or learn from home, as well as those products that allow people to refrigerate or freeze food,” said Best Buy CEO Corie Barry.

“Customers can also still order online or on the app and have their products shipped directly to their homes. Large products such as appliances will be delivered where permitted and under strict safety guidelines with everything being left by the customer’s door,” said the company in a press release.

Best Buy also slashed executive pay, meaning that CEO Barry will receive half her salary, senior executives will take a 20% pay cut to their base salary through at least September 1, while the members of the board will receive half of their cash retainer fees during the same period.

The retailer also withdrew all fiscal 2021 financial guidance, previously communicated in February, while also suspending all share repurchases.

Technical analysis: Rebound losing momentum

The latest news from Best Buy forced the stock price to rotate lower and at least pause the rebound from the multi-year lows. Shares of Best Buy managed to recover 50% of losses from February and March.

Best Buy stock price is now battling to stay above the descending trend line (the purple line) around the $66 handle. A close below this level could create a failed break out on the weekly chart, and generate more selling pressure going forward.

The stock price is now approaching the intraday support at $65. This is an important level which, if broken, can facilitate a deeper pullback towards $61. On the upside, the key weekly target for the bulls is $75.

Summary

Shares of Best Buy plunged more than 6% today after the retailer said it will furlough 51,000 hourly employees starting Sunday. Despite the fact that all of its stores are closed, Best Buy said that it retained about 70% of its sales compared to last year.