Microsoft To Close All Of Its 83 Retail Stores

Microsoft (MSFT) has announced that it will be closing all of its retail stores in light of its growing online sales during the coronavirus pandemic.

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“Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has proven success serving customers beyond any physical location,” Microsoft’s Corporate VP David Porter said in a statement on June 26.

Microsoft will close down all of its 83 stores with the exception of four locations which will be rebranded as “Experience Centers.” Closing the stores will incur a pre-tax charge of $450 million or $0.05 per share. Additionally, no employee layoffs will result from the closings, the company said.

The announcement highlighted the tech giant’s effort to reallocate its retail resources to a remote platform in light of the initial March store closings that resulted from the COVID-19 pandemic. Microsoft noted that retail staff were able to continue assisting enterprise and education customers through support calls and virtual training, hosting more than 14,000 online workshops and summer camps in addition to over 3,000 virtual graduations.

“We deliberately built teams with unique backgrounds and skills that could serve customers from anywhere. The evolution of our workforce ensured we could continue to serve customers of all sizes when they needed ur most, working remotely these last months,” said Porter. He added, “We are grateful to our Microsoft Store customers and we look forward to continuing to serve them online and with our retail sales team at Microsoft corporate locations.”

Wedbush analyst Daniel Ives on Friday, commented, “This is a tough, but smart, strategic decision.The physical stores generated negligible retail revenue for MSFT and ultimately everything was moving more and more towards the digital channels over the last few years.”

Ives maintained his Buy rating on the stock with a price target of $220 implying an upside of 12%.

He noted, “In this COVID-19 environment, this was the right time for Redmond to rip the band-aid off and close the stores strategically speaking, with a one-time charge being primarily overlooked by the Street.”

Microsoft stated that it will continue to invest in its digital storefronts on Microsoft.com, and stores in Xbox and Windows, reaching more than 1.2 billion people every month in 190 markets.

Shares were down 2% at market close on Friday at $196.39 per share.

Microsoft’s stock is up 25% year-to-date with 24 analysts assigning a Buy rating, 1 Hold, and no Sell ratings which altogether results in a consensus of a Strong Buy on TipRanks. The average analyst price target stands at $209.21 (7% upside potential). (See Microsoft’s stock analysis on TipRanks)