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:
Under Brian Dunn, $BBY went from $33 to $22 while the S&P 500 went from 900 to 1400. So yeah, it's time to go. $$— Eddy Elfenbein (@EddyElfenbein) April 10, 2012
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.