Best Buy chief executive resigns# Stock
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http://www.ft.com/intl/cms/s/0/78654222-8316-11e1-929f-00144fea
The chief executive of Best Buy has resigned after three years in which
investor confidence in the US electronics retailer and its ability to
compete against online retailers led by Amazon has eroded.
Brian Dunn, who joined Best Buy as a store assistant 28 years ago, had begun
reforms to tackle its faltering sales and profit growth but still struggled
to convince investors over the long-term outlook for the company.
“There was mutual agreement that it was time for new leadership to address
the challenges that face the company,” Best Buy said. It added it was
looking for a successor and named Mike Mikan, a Best Buy director and former
executive vice-president of UnitedHealth, as interim chief executive.
During Mr Dunn’s time, Best Buy became a prime victim of “showrooming”
shoppers who use bricks-and-mortar stores to research products then buy them
online. His record was tarnished by operational problems, including gloomy
stores and a failure to meet some orders on its website last Christmas.
Stacey Widlitz of SW Retail Advisors said of Mr Dunn: “He grew up in the
store. His speciality is the stores. Was he the right guy for the chief
executive? In this environment he was probably not the ideal candidate.”
As analysts criticised Best Buy for overexpanding, Mr Dunn last year pulled
the plug on Best Buy’s big box store partnership with Carphone Warehouse in
the UK and closed nine own-branded stores in China.
Last month, as he reported a 2.2 per cent fall in holiday season sales, Mr
Dunn said: “I’m not satisfied with the pace or degree of improvement in
our performance and transformation.”
He unveiled plans to close 50 US big box stores and cut 400 jobs as part of
an effort to reduce costs by $800m while also broadening an initiative to
sell more online while making its stores smaller and more focused on mobile
communications and devices.
But Best Buy shares slid 2.2 per cent in the seven trading sessions between
then and his resignation. The company’s shares initially rose as much as 3.
8 per cent on news of Mr Dunn’s resignation, but then fell sharply to trade
3.3 per cent down at $21.91.
Carol Levenson, director of research at Gimme Credit, said: “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.
” She added, however, that it was still profitable and had a strong balance
sheet, cash flow and brand.
Mr Dunn was promoted to chief executive soon after the liquidation of
Circuit City, which left Best Buy as the US’s only national electronics
chain. But rather than winning market share from it, Best Buy lost business
to increasingly competitive online retailers with better prices and a
widening selection.
Prices on Best Buy’s website are on average 4.2 per cent higher than Amazon
, before tax and shipping, according to Barclays Capital. Last month Mr Dunn
told the Financial Times that the hardest part of competing against Amazon
was that it does not collect sales tax in many US states.
Best Buy said: “There were no disagreements between Mr Dunn and the company
on any matter relating to operations, financial controls, policies or
procedures.” But the list did not include “strategic direction”, noted Ms
Levenson.
The chief executive of Best Buy has resigned after three years in which
investor confidence in the US electronics retailer and its ability to
compete against online retailers led by Amazon has eroded.
Brian Dunn, who joined Best Buy as a store assistant 28 years ago, had begun
reforms to tackle its faltering sales and profit growth but still struggled
to convince investors over the long-term outlook for the company.
“There was mutual agreement that it was time for new leadership to address
the challenges that face the company,” Best Buy said. It added it was
looking for a successor and named Mike Mikan, a Best Buy director and former
executive vice-president of UnitedHealth, as interim chief executive.
During Mr Dunn’s time, Best Buy became a prime victim of “showrooming”
shoppers who use bricks-and-mortar stores to research products then buy them
online. His record was tarnished by operational problems, including gloomy
stores and a failure to meet some orders on its website last Christmas.
Stacey Widlitz of SW Retail Advisors said of Mr Dunn: “He grew up in the
store. His speciality is the stores. Was he the right guy for the chief
executive? In this environment he was probably not the ideal candidate.”
As analysts criticised Best Buy for overexpanding, Mr Dunn last year pulled
the plug on Best Buy’s big box store partnership with Carphone Warehouse in
the UK and closed nine own-branded stores in China.
Last month, as he reported a 2.2 per cent fall in holiday season sales, Mr
Dunn said: “I’m not satisfied with the pace or degree of improvement in
our performance and transformation.”
He unveiled plans to close 50 US big box stores and cut 400 jobs as part of
an effort to reduce costs by $800m while also broadening an initiative to
sell more online while making its stores smaller and more focused on mobile
communications and devices.
But Best Buy shares slid 2.2 per cent in the seven trading sessions between
then and his resignation. The company’s shares initially rose as much as 3.
8 per cent on news of Mr Dunn’s resignation, but then fell sharply to trade
3.3 per cent down at $21.91.
Carol Levenson, director of research at Gimme Credit, said: “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.
” She added, however, that it was still profitable and had a strong balance
sheet, cash flow and brand.
Mr Dunn was promoted to chief executive soon after the liquidation of
Circuit City, which left Best Buy as the US’s only national electronics
chain. But rather than winning market share from it, Best Buy lost business
to increasingly competitive online retailers with better prices and a
widening selection.
Prices on Best Buy’s website are on average 4.2 per cent higher than Amazon
, before tax and shipping, according to Barclays Capital. Last month Mr Dunn
told the Financial Times that the hardest part of competing against Amazon
was that it does not collect sales tax in many US states.
Best Buy said: “There were no disagreements between Mr Dunn and the company
on any matter relating to operations, financial controls, policies or
procedures.” But the list did not include “strategic direction”, noted Ms
Levenson.