Former Best Buy Co Inc. (NYSE: BBY) CEO Brian Dunn resigned from the struggling electronics giant after just three years at the helm, the company announced yesterday (Tuesday), and just two weeks after announcing a major restructuring plan.
According to Bloomberg News there was "no disagreement on any matters relating to operations, financial controls, policies or procedures." Dunn's departure was "part of a mutual agreement of the necessity to address the challenges that face the company."
Dunn was with the company for 28 years, starting as a store assistant. Board member G. Mike Mikan will take over as interim chief executive.
Despite Dunn's decades-long commitment to the company, he might not have had what's needed to dig Best Buy out of the hole into which it's sinking. The ailing retailer is in the midst of revamping its stores and overhauling its business model, attempting to attract customers - and more importantly, get them to buy.
"[Dunn] grew up in the store. His specialty is the stores," Stacy Widlitz of SW Retail Advisors told The Financial Times. "Was he the right guy for the chief executive? In this environment he was probably not the ideal candidate."
What a New Best Buy CEO Must Do
Best Buy has seen customer traffic wane as competition heats up from discount online retailers. Sales over the crucial holiday season were lackluster.
Now many customers come to Best Buy simply to comparison shop, view and test items, and then purchase them at lower prices somewhere else.
It's been suffering at the hands of its competition - especially Amazon.com Inc. (NASDAQ: AMZN).
In an attempt to modernize its business model, Best Buy last month announced plans to close 50 of its big box superstores and downsize others. Space in some of its 1,400 U.S. stores will be walled out and sublet to smaller retailers.
The moves are part of Best Buy's goal to reduce $800 million in costs by 2015, which includes slicing some 400 jobs.
Analysts overall were unimpressed with Best Buy's turnaround strategy. Some questioned whether the retailer was moving swiftly enough to adequately address the changes it needs to make.
Dunn was among those frustrated with the company's slow progress.
"I'm not satisfied with the pace or degree of improvement in our performance and transformation, especially given the opportunities we have in the marketplace," Dunn told analysts last month.
Many agree that a new CEO is not the only fix Best Buy needs to succeed and bring back its cache, and more importantly, customers.
Carol Levenson, director of Gimme Credit, told FT, "We doubt that any one man or woman is at fault or can single-handedly turn it around. Best Buy is yoked to a business model whose time may have come and gone."
Levenson did add that the company is still profitable and had a strong balance sheet, cash flow and brand.
The person tasked with saving Best Buy will have to accept that the Internet now is the retailing battleground - and find a way to conquer it.
"One of the key questions is "What's our strategy going to be? Downsize stores? Shift from stores to digital? Or is it to invent a concept in the U.S.?'" Jason Goldberg, vice president of strategy and consumer experience at retail consultancy CrossView Inc., told Forbes. "The riskiest is to invent a new model in the U.S., but I really think that's going to be the play for Best Buy. So that's going to take a non-traditional CEO."
BBY Slides
In the past five years, Best Buy shares have shed more than half of their value.
While the company's revenue rose 3.4% to $16.63 billion in the latest quarter, sales at its bricks-and-mortar stores, on its Websites, and phone order centers opened at least 14 months slid 2.4% compared with the same period a year earlier.
The sales declines were mostly among TVs and laptops. On a positive note, Best Buy sells many of Apple Inc.'s (NASDAQ: AAPL) popular devices. In fact, a recent survey by Consumer Intelligence Research found that 13% of U.S. iPhone buyers over a three-month period bought phones at Best Buy.
But competition from Apple and phone company stores has left Best Buy with a smaller share in the smartphone/tablet market than it enjoyed with former best-selling products such as flat-screen TVs and DVD players. This new reality for consumer electronics is what the next CEO will have to accept.
"Best Buy needs to bring in a CEO who embraces change to do battle with the likes of Amazon," Brian Sozzi, an independent analyst in New York told Bloomberg following Dunn's resignation. "The world of consumer electronics retailing five years out is online, online, online."
Sozzi currently rates the shares a "Sell."
Following Dunn's resignation shares rose then quickly fell. BBY ended the day down 5.87% to $21.32, a whopping 35% off its 52-week high of $32.85.
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- The Financial Times: Best Buy chief executive resigns
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- Businessweek: Best Buy’s Dunn Resigns as CEO; Mikan to Serve in Interim
- Forbes: Who Should Replace Brian Dunn As CEO Of Best Buy?