Microsoft to Write-Off $450m On Shut Down of Physical Stores

Microsoft to Write-Off $450m On Shut Down of Physical Stores
June 29, 2020

 

Microsoft Corp (Nasdaq: MSFT), on Friday, issued a statement revealing its plan to shut down all the retail stores it operates and start focusing on an online store, which can be accessed via Microsoft.com. Microsoft owns 116 physical stores spread across five countries, namely the US, UK, Canada, Australia, and Puerto Rico. The company will also incur a one-time charge related to the decision to shut down physical locations. Following the announcement, the stock lost $4.01 or 2.00% to close at $196.33.

The Redmond, Washington-based company stated that the online store would offer training, support, sales, and many more services. Instead of assisting people who visit the stores, from hereon, Microsoft’s retail team will provide necessary help via the website. A company spokesperson clarified that all employees would be given the opportunity to stay with Microsoft.

In a blog post, Microsoft Corporate Vice President David Porter has written that the company’s online sales have risen in tandem with advancements in the product portfolio, while the skillful team has demonstrated their ability to serve clients outside of physical locations. Porter said, “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.”

Over the past decade, Microsoft started expanding its retail operations in an attempt to establish a shopping experience comparable to Apple’s, where potential customers could go and test the latest software and hardware products created by both Microsoft and its associates. The company even constructed a store in New York City (5th Avenue), a few buildings away from the iconic glass cube shop of Apple.

It seems that the decision has been made after Microsoft closed its shops in March due to the COVID-19 outbreak. The company revealed that shutting down physical venues will cost roughly $450 million or $0.05 per share in the form of pre-tax charges in the current quarter ending June 30th. The fees will primarily consist of write-offs and impairments.

Microsoft stated that it would continue to invest in online shops, which can be accessed via Mircosoft.com and “stores in Xbox and Windows, reaching more than 1.2 billion people every month in 190 markets.”

The company has introduced an array of new services, including 1:1 video chat support, virtual workshops, and online tutorial videos. More digital solutions are planned to be introduced by the company.

Furthermore, the company will reorganize spaces that serve all clients, including “operating Microsoft Experience Centers in London, NYC, Sydney, and Redmond campus locations.”

Specifically, the current stores in New York, London, Sydney, and Redmond will be transformed into experience centers, but will not sell any products. Fundamentally, the one-time write-off is expected to turn the stock range-bound with a bearish bias.

Technically, the stock is facing resistance at 200. The next support is anticipated only near 140. Additionally, the stochastic oscillator is in the overbought region. Therefore, we are expecting the stock to continue declining further in the days ahead. We would prefer to enter a trade after the stock breaks below the 50-day moving average and maintain a strict stop-loss order.

msf - technical analysis - 1st July 2020

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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