Microsoft to close physical stores, takes $450m hit

Marco Green
June 29, 2020

Washington based software giant Microsoft Corp said on Friday it would close its retail stores and take a related pretax asset impairment charge of $450 million in the current quarter.

"The past months have been extraordinary ... amidst the challenges, our team has focused on how we can continue to serve our customers", David Porter, corporate vice president of Microsoft Store, said. It has now decided that these physical stores will not re-open. These are locations in New York, London, Sydney and Redmond. There were no Microsoft Stores in the Netherlands yet. "The physical stores generated negligible retail revenue for Microsoft and ultimately everything was moving more and more towards the digital channels over the last few years", Wedbush analyst Dan Ives said in a note.

Besides product sales, Microsoft's stores offered users a place to try out Windows-run PCs, Xbox consoles and various third-party computers and phones.

As physical stores went offline, Microsoft asserts that it has enjoyed "significant growth", of its digital storefronts including, and stores on Xbox and Windows.

The company also vows to beef up the digital version of the Microsoft Store with "virtual customer support from our trusted experts, online tutorial videos, virtual workshops with tips and much more", including personal video sales support calls. "The Microsoft stores were essentially "showcase stores" and was a smart strategy at the time, as more consumers can demo software, Xbox/gaming and play around with new hardware components". Microsoft shut the doors of all retail stores on March 16 in response to the ongoing pandemic.

Individual consumers primarily buy Microsoft products through is retail outlets, according to the company's latest annual report filed in October with the US Securities and Exchange Commission. Microsoft's Cloud Solution Provider program is its main partner program for reselling cloud services.

"Our retail team members will continue to serve customers working from Microsoft corporate facilities or remotely and we will continue to develop our diverse team in support of the overall company mission and objectives".

The closure of the physical stores will result in a pre-tax charge of almost $450 million (Dh1.7 billion), or $0.05 per share, in the current quarter ending on June 30, the company said.

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