TORONTO-- Best Buy Co.'s Canadian unit will lay off 950 full-time employees, or about 5.6% of its workforce, as it realigns its operations to better compete in a tough retail environment.

The electronics retailer said the cuts are aimed at reducing some management layers and consolidating sales departments, and will affect workers at both its Best Buy Canada and Future Shop banners.

The move comes soon after the U.S. parent posted weaker-than-expected holiday sales on Jan. 16, causing its stock to tumble. Observers said the weak holiday results were a sign that its discounting strategy, aimed at squaring off against competitors such as Wal-Mart Stores Inc., had failed to gain traction with consumers.

Best Buy doesn't break out sales results for its Canadian unit.

"We have been focusing on simplifying our store structure and increasing efficiencies to better align with the changing needs of our customers," said Best Buy Canada President Ron Wilson in a statement.

Mr. Wilson pointed to a silver lining for the retailer, noting that online sales have risen by more than 50% in the past year and new services such as in-store product pickup are doing well.

The layoff announcement comes just one day after Sears Canada Inc. said it was cutting 624 jobs. The department store retailer, which is controlled by Sears Holdings Corp., also shed many jobs last year as it undertook a turnaround effort.

The arrival of U.S. retailers including discounting giant Target Corp. has led to steep discounting and stiff competition in the Canadian retail sector.

Write to David George-Cosh at david.george-cosh@wsj.com

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