Best Buy’s New Direction?
One fine morning, three weeks ago, a colleague visited my office with some startling news. Best Buy had announced the sudden resignation of homegrown CEO Brain Dunn. Another colleague happened by, heard the news and began the natural speculation of just what might have happened to bring this shocker about.
Having no information other than essentially the headline, we respectively assumed that recent very troubling financials and a few headline grabbing corporate flubs (noted here in recent Discount Insights titled, Fright Before Christmas, Best Buy’s Fight After Christmas, and Best Buy’s Final Frontier?) were the prime causes of the CEO’s ‘resignation’. The most alarming of these severe missteps was the last-minute, prior-to-Christmas delay in announcing the company’s inability in fulfilling online orders made in November and December, beginning with orders placed as far back as Black Friday.
Later that morning the headlines exploded, revealing that indeed Dunn had left under the cloud of an ongoing investigation into his personal conduct involving corporate funds and a personal/professional relationship. Surprise upon surprise as the troubled retailer’s board was tasked to determine who and what were the best drivers to steer the company through its murky near-term gauntlet of a future.
As it turns out, the board’s first decision was to navigate through a seemingly overcrowded minefield of possibilities to determine which courses are best to follow to find the next CEO. Before doing this, this disparate group must consider a multitude of options as to how to strategically right the company’s ship unless they decide to throw all such determinations on the plate of the next CEO.
Brian Dunn was the prototypical American success story. Mr. Dunn began his career with Best Buy as a store sales associate in 1985, when the company operated only a dozen stores. Within four years he became a store manager and a year later he was made a district manager in Minnesota. All this as he was barely thirty without having attended university.
In June 2009, Dunn was named a company director and replaced Brad Anderson as CEO. Like many retailers at the time, the company was stung by the horrors of the recession, Best Buy’s only national brick and mortar competitor,CircuitCity had just liquidated and most analysts expected Best Buy to pick up the spoils. However, with chillingly typical tone deafness, Best Buy stores did little to overtly attract the throngs of shoppers who no longer had a CircuitCity option. Many of its stores offered meek signage offering CircuitCity ex-pats the obvious option of visiting the service counter for any electronics that required repair.
Shortly after this, expansion minded hhgregg announced they would honorCircuitCityextended warrantees as they began to take over several abandonedCircuitCitylocations while entering new markets in states previously undreamed of by analysts. Thus hhgregg gained the attention of consumers abandoned byCircuitCityas well as by analysts on Wall Street. Much of this upstart glory was gained at Best Buy’s passive expense.
Initially upon hearing of Brian Dunn’s departure and just before word passed of an investigation into the man’s personal conduct, many assumed that Best Buy’s board had decided that it was time to aggressively rethink the future. Those were hopeful moments. As word came out of a possible personal scandal, the company began to almost bleed rumors as what was next. More than indicating what might be likely to come, it seemed confusion reigned.
Stories emerged that founder Richard Schulze, who was believed to be increasing his role in the company, was at odds with several board members as to how to begin the recruiting process and what philosophy to pursue in planning a more positive future. The company promised to issue an impartial, detailed explanation of the Dunn ‘affair’ after the investigation, which is being led by a formerU.S.attorney and ex-enforcement director for the SEC, is completed. This is likely to lead to more embarrassment for Mr. Dunn or for the corporation if he is exonerated after allegedly being forced to resign. In fact he may be eligible for a severance package of as much as $3.35 million, depending on the outcome of the investigation.
Meanwhile troubling headlines abound as to the next steps for the troubled company. Best Buy: Search for CEO Could Take Up to Nine Months, is one troubling headline. Best Buy Appoints CEO Search Committee sounds innocent enough but is followed by the fact that as part of Best Buy’s commitment to transparency, the board will also publicly announce a selected search firm in addition to its own widespread recruiting efforts and will post the position on the company website. The final search firm selection will be announced in the next few weeks.
The only internal candidate currently under consideration is G. “Mike” Mikan, a former healthcare executive who is serving as interim CEO. Many observers, especially those representing Wall Street worry that not being able to imminently name a permanent CEO suggests either a lack of a succession plan or a managerial breach within the company.
Other recent headlines include, Best Buy’s CEO Succession Circus Continues, which raises the questions of many as to the need to take months to conduct the search for a new leader and perhaps a new operational plan. Best Buy’s Dunn May Be Able to Get $3.35 Million Package, speaks for itself and portends more drama and embarrassment than even a healthy company should stand.
Meanwhile Best Buy continues with its plan to immediately close fifty stores and try to shrink many of its others. Professional suggestions race across the Internet including radically reducing store size and selection while ramping up its diminutive Best Buy Mobile locations. Some even suggest reviewing a possible acquisition of the ubiquitous but equally troubled RadioShack chain.
Whatever the outcome, this turn of events must be viewed as an opportunity for a retailer that has been coming up short on its sales floor as it tries to build its web presence through serious stumbles. The company momentarily basked in the demise of CircuitCity but now finds itself battling brilliant regional CE chains, CE independents with a strong national web presence and Walmart, Target, Costco and other strong discounters, while it tries to discourage its image as a showroom for Amazon and other efficient web merchants. And the beat goes on.