The Big Story Blog

The Big Story Blog: April 10, 2012 Archive

Friday 4/10/2012
What's Best Buy's future?

Posted at 9:19 AM on April 10, 2012 by Paul Tosto
Filed under: Hed

Best Buy's chief executive resigns. The stock price falls as critics pile on the Richfield-based company's business strategy. Where is the company -- and its thousands of Minnesota employees -- headed?

Will leadership change turn around Best Buy?

Posted at 9:44 AM on April 10, 2012 by Paul Tosto
Filed under: Economy

bestbuy2500.jpg
(Photo by Justin Sullivan/Getty Images)

Best Buy executives today called it a "mutual agreement" between the company and chief executive Brian Dunn that Dunn will end his 28 years with the company and Best Buy will seek "new leadership to address the challenges that face the company."

Those "challenges" are huge.

Best Buy critics have publicly questioned the Richfield-based company's strategy and whether it was built for the long haul.

The company today said director G. Mike Mikan has been named interim CEO while a search for a new executive is underway.

No matter who's picked, though, the basic question still stands: Can a company that built a fortune selling electronics from brick-and-mortar stores survive the competition in the Internet age?

LIVE: Best Buy and the future of big box retail

Posted at 10:00 AM on April 10, 2012 by Jon Gordon
Filed under: Retail

We live blogged the conversation this morning from MPR's Daily Circuit program.

Check it out below or listen to the whole conversation.

Best Buy stock tells the story

Posted at 11:30 AM on April 10, 2012 by Paul Tosto
Filed under: Economy, Retail

Investors vote with their cash. When they don't see an upside in a company's direction, they start pulling out, the stock falls and executives and corporate boards quickly get the point.

That's pretty much what's happened since the start of the year with Best Buy.

After a Christmas debacle with online sales, a Forbes columnist laid out the case that the company really didn't have a long term strategy for survival.

On his blog, company CEO Brian Dunn pushed back, defending the strategy.

Investors, though, simply didn't buy it and that's really what mattered. Dunn and the company parted ways today. If the stock was up and investors were happy, no doubt he'd still be running the company.

Here's a look at the last six months of Best Buy stock performance:

bestbuystock.jpg

It's telling that today you can still find the Forbes criticism online but Dunn's defense on his "Brian's Whiteboard" blog has been wiped from the Best Buy site.

We hung onto it. Here's the complete text of what Dunn wrote in January:

Best Buy has been taking some criticism lately. As CEO, I know that criticism goes with the job, and I'm well aware we have some challenges. I also know that errors we make often translate into a poor experience for our customers, and that is simply unacceptable.

Still, while I agree with some of the commentary on areas we need to improve, I feel it's important to set the record straight on statements about our company that are, in my opinion, not completely grounded in fact. And I feel the need to do so, in part, to make sure our 180,000 hard-working employees understand the whole story - and have the full context that allows them to develop their own opinion about what's written and said about Best Buy.

Let's start with a couple of examples where I think the critics got it right.

The cancellation of some internet orders just before Christmas was our fault, and it's not representative of how we EVER want to treat our customers. I'll spare you the technical explanation of how and why it happened, but we know we did not deliver a good experience and we're truly sorry. We've worked to make amends with customers whose holidays were made less happy because of our mistake, and we're working diligently to make sure it doesn't happen again.

Another area where we have received fair criticism is the overall speed of the transformation of our business model - something we are working hard to address. We've accelerated changes to key elements of our model already (the significant expansion in the number of products available on Bestbuy.com and the launch of our online Marketplace are two recent examples), but we need to move even faster, particularly in creating a more seamless experience between our stores, web sites, call centers and services teams. We recognize people can and do shop from anywhere, and they expect thoughtful, helpful interactions from us every step of the way. We continue to invest in a number of areas - from employee training, to critical system enhancements - to ensure our customers always receive the kind of experience they deserve and expect from us, wherever and whenever they choose. But, simply put, that work needs to happen faster - and we're taking significant steps to accelerate the pace.

Now, onto a couple of topics where I disagree with the critics.

First, some believe the internet has made physical retailing (i.e., stores) irrelevant. There's no doubt that the internet, and the mobile web in particular, have changed the way people shop, but there is strong evidence that consumers continue to value the experience of shopping in stores. A recent study by the NPD Group, a leading market research company, notes that nearly 80% of consumer electronics revenue still moves through physical stores. Additionally, approximately 40% of customer purchases made through Bestbuy.com are picked up in one of our stores. And the truth is, traffic in our physical stores increased in our third quarter and has been trending positively for most of the year.

Finally, there are those who question the validity of Best Buy's business model. This misguided perspective is especially troubling for me, because it blatantly and recklessly ignores overwhelming evidence to the contrary. Best Buy is a financially strong and profitable company that has generated more than $2.6 billion in cash flows from operating activities in the first three quarters of the fiscal year. We also delivered positive operating income in each of the first three quarters of fiscal 2012. We grew total market share in the third quarter according to the most recent public data available. We have closed down certain operations that were not profitable, which we expect to have a positive impact on our earnings going forward. And we are focusing the company on areas where we see the greatest opportunities for growth and profit: mobile devices and connection plans; enhanced digital and e-commerce strategies; growth in our services business; and expansion of our established business in China.

As I mentioned earlier, we fully expect to receive our share of criticism - we're a big company and we don't always get everything right. But this is one of those times when I felt it was necessary not only to acknowledge our shortcomings, but to set the record straight on issues where facts are being obscured by rhetoric.

A quick look at Best Buy's interim CEO

Posted at 12:08 PM on April 10, 2012 by Paul Tosto
Filed under: Economy, Retail

Best Buy board member G. Mike Mikan will serve as interim chief executive as the company searches for a permanent CEO to replace Brian Dunn.

Basketball fans may recognize Mikan's pedigree: He is the grandson of George Mikan, Hall of Fame center for the Minneapolis Lakers and one of the giants of the game.

Here's a look at a 2010 profile of the younger Mikan from 2010 when he was a top UnitedHealth executive and CNN / Money named him one one the nation's "40 under 40" business people.

mikan.jpg

Why Best Buy CEO 'had to quit'

Posted at 1:38 PM on April 10, 2012 by Paul Tosto
Filed under: Economy, Retail

Forbes magazine really shook the earth on Best Buy with its January essay detailing why the Richfield-based retail giant was doomed.

Today, writing about the news that Best Buy CEO Brian Dunn was resigning, Forbes got some interesting detail from Colin McGranahan, an analyst with Bernstein Research who follows Best Buy:

Colin McGranahan of Bernstein Research says the news of Dunn's resignation as CEO, coming so soon after a disastrous Q4 and announced multi-year restructuring program, suggests that Dunn and the Best Buy board were not on the "same page" about the direction the company needed to go in. He was big on stores and physical retailing.

McGranahan says the board is going to find someone willing to do bolder things such as get out of China to raise capital, whack payroll at the store level and figure out the Web in a real way. No one is going to buy this thing, given that there is no one to buy it.
It's not clear what Best Buy will look like to customers in five years. But there's no doubt big change is on the way.

Best Buy stock takes it on the chin

Posted at 3:25 PM on April 10, 2012 by Paul Tosto
Filed under: Economy, Retail

It was a lousy day, generally, in the markets. But for Best Buy it's the kind of day that lives in infamy.

The stock plummeted nearly 6 percent today, partly on news of the resignation of chief executive Brian Dunn.

Writing on the Nightly Business Report website, analyst Michael Kahn sees Best Buy stock in the grip of bears.

What makes Tuesday's performance even more bearish was the initial rally when the news first was released. Shares rallied 5% from Monday's close before collapsing to a 5% net loss. That is roughly a 10% swing from high to low and, of course, significantly more than the Standard & Poor's 500's loss.

The question for investors is if this is the final purge of hope in the stock, otherwise known as capitulation or throwing in of the towel. Based on momentum readings in everything but the shortest of time frames, the answer is likely to be no.

Trendlines, moving averages and even volume indicators are all pointing lower. While that is no guarantee for lower prices it does suggest that investors honor the spirit of Best Buy's bear market. Selling rallies, not buying dips, is the higher percentage play.

A more likely scenario for a turnaround in the stock would be an extended period of flat trading and diminished interest. In other words, people forget about it as it heals. A base, or calm trading range forms on the charts and finally, at some point in the future, the stocks has an upside breakout.

And if there never is a recovery, investors will not be trapped bottom fishing in a stock that is dying.

Paper: Conduct questions led to Best Buy CEO exit

Posted at 3:11 PM on April 10, 2012 by Paul Tosto
Filed under: Economy, Retail

The Star Tribune this afternoon is reporting that matters beyond strategy and stock performance led to the resignation today of Best Buy CEO Brian Dunn.

The newspaper writes:

An investigation into personal misconduct led to the sudden resignation of Best Buy CEO Brian Dunn, the electronics retailer acknowledged Tuesday.

"Certain issues were brought to the board's attention regarding Mr. Dunn's personal conduct, unrelated to the company's operations or financial controls, and an audit committee investigation was initiated. Prior to the completion of the investigation, Mr. Dunn chose to resign," said Claire Koeneman, of H+K Strategies, and a spokeswoman for the Richfield-based electronics retailer.

The revelation came in response to questions from the Star Tribune about whether Dunn's behavior was a factor in the decision that he step aside. Within the past two weeks, Dunn told analysts that he was "excited about the strategy we have for the future."

The future of big box retail on The Daily Circuit

Posted at 4:58 PM on April 10, 2012 by Jon Gordon
Filed under: Retail

A mid-life crisis for big box retailers such as Best Buy? The Daily Circuit tackled that question today after we got word that Best Buy CEO Brian Dunn had resigned.

Listen to the discussion here.

About Paul Tosto

Paul Tosto

Paul Tosto writes the Big Story Blog for MPR News. He joined the newsroom in 2008 after more than 20 years reporting on education, politics and the economy for news wires and newspapers across the country.

April 2012
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30          


Master Archive