For someone who has worked both sides of the Atlantic, Best Buy CEO Hubert Joly seems quite skeptical about exporting the company to the rest of the world.
“Retail is not the most global of businesses by any stretch of the imagination,” Joly told investors in New York last fall. “China [for example] is not a goal unto itself. If we can’t find a way to make business successful, then we shouldn’t be in China.”
True to his word, Best Buy last month said it will close 15 stores in Canada, including seven branded big boxes and eight Future Shop locations, its local banner. The move follows another bad month for Best Buy International: same-store sales fell 6.4 percent in December compared a decline of 3.1 percent during the same month in 2011.
International’s struggles has fueled speculation that Best Buy will soon end its European joint venture with British phone giant Carphone Warehouse (CPW) in Best Buy Europe, which includes Geek Squad and 2,393 smaller format Carphone Warehouse and the Phone House stores. The continent, in particular, has been a particularly tough market for Best Buy as the economic turmoil has weighed heavily on consumers. Best Buy has already closed its branded big box stores in the United Kingdom and Turkey.
But Joly does not seem to be in a hurry to end the 50/50 joint venture—and for good reason. Beginning in 2015, Best Buy can buy out CPW’s 50 percent stake for a price 10 percent less than the joint venture’s fair market value, according to SEC documents. If Best Buy declines the option, CPW can purchase Best Buy’s stake under the same terms.
That gives Joly about two years to decide the fate of Best Buy Europe. By that time, Europe’s economy may have recovered to the point where the company may want to keep the business.
Best Buy Europe already shows signs of improvement. For the 13 weeks ended Dec. 29, revenue grew 7.8 percent on a constant currency basis to $1.7 billion.
But like with most things with Best Buy these days, things are not that simple. According to British news reports, should founder Richard Schulze succeed in acquiring Best Buy, CPW can purchase Best Buy’s 50 percent stake at a price 10 percent lower than fair market value, which some analysts estimate at $838 million. Since Best Buy spent $2.1 billion to acquire that stake, that means the retailer would absorb a significant loss.
The so-called change in control clause gives CPW the right to exercise its option “if any party acquires a Controlling Interest in Best Buy (save for Richard Schulze, either alone or with Brian Dunn and any of their connected persons and in each case through a genuine and good faith structure through which he or they hold a Controlling Interest themselves).”
In order words, it seems the agreement specifically excludes a Schulze buyout as an event that could trigger a CPW buyout. But it depends on how you interpret “connected persons” since Schulze has enlisted a trio of outside private equity firms to finance the bid.
Of course, nothing precludes Best Buy and CPW just rewriting their agreement. Best Buy, after all, paid CPW a hefty $1.2 billion fee to end their alliance on Best Buy Mobile. Best Buy could presumably just pay CPW another fee to significantly alter or perhaps scrap the joint venture.
But then again, Best Buy does not currently have the financial firepower to do anything that drastic. The company recently lowered its free cash estimate for fiscal 2013 to $500 million from an earlier estimate of $850 million to $1 billion. Best Buy appears to be investing that cash on matching competitors’ prices in the United States and remodeling stores.
So perhaps Joly’s best move on the joint venture is to continue his current strategy: sit back and see how things play out.
If you're spending time this weekend making charitable contributions online or mailing checks by Dec. 31 to get a 2012 tax deduction, you can check a charity-rating service to see how wisely the charity is spending your money.
Sounds like a good idea but it's not as easy as it sounds. Only about 7,500 of the 1 million charities in the U.S. are evaluated by three popular review agencies such as Charity Watch, Charity Navigator and the Better Business Bureau's Wise Giving Alliance, said Ken Berger, CEO of Charity Navigator.
Making matters more complicated, the ratings, which can be a letter grade, one to four stars or a simple "yes" or "no" seal of accreditation depending on the source, vary widely among the reviewers. The Humane Society of the United States, for example, is given a "D" rating from Charity Watch, 4 stars from Charity Navigator and the BBB Accreditation Seal.
Conflicting ratings means more work for conscientious givers, and may make some givers avoid the ratings all together. But if you're giving to a charity for the first time, it can still be helpful to check some of the ratings at Charity Watch, Charity Navigator, Give Well or the BBB's Wise Giving Alliance.
If a charity isn't listed by any ratings services, Charity Navigator offers some guidelines for performing your own due diligence.
Probably not the start Best Buy had hoped for.
The initial sales numbers for Windows 8 devices are out and they don’t look good. Since Microsoft debuted its latest operating system on Oct. 26, Windows device sales have fallen 21 percent compared to the same period a year ago, according to the NPD Group.
Windows 8 has captured only 58 percent of Windows unit device sales, far less than the 83 percent for Windows 7. NPD says Windows 8 tablet sales have been “non existent,” accounting for less than one percent of all Windows 8 device sales.
“You would like to see some kind of acceleration,” said NPD analyst Stephen Baker. “We didn’t see any impact.”
So why does this matter to Best Buy? The consumer electronics retailer, the country’s largest seller of PCs, typically gets a big sale lift from the release of a next generation Windows operating system. Best Buy especially hoped Windows 8 would give a sizable boost to the key holiday shopping period. At a recent investors conference in New York, top executives noted the retailer carries 45 Windows products that are exclusive to Best Buy, including 28 touch screen devices.
Best Buy spokeswoman Amy Von Walter said Windows 8 is such a unique system that it will take time for consumers to digest it.
"We always knew that Windows 8 was going to be a long term proposition," she said. "Unlike other new devices, Windows 8 will be rolled out over several months."
True enough. But will Windows 8 make a meaningful impact on Best Buy's holiday sales?
Baker said weak initial sales doesn’t necessarily mean a bad holiday season. For one thing, sales of more expensive Windows 8 notebooks with touch screens have been strong, helping Microsoft to establish a foothold in the premium segment normally dominated by Apple.
“The most expensive [Windows 8] products did the best,” Baker said.
In fact, Best Buy said sales of Lenovo's Yoga laptop have been strong, said company spokesman Jeff Haydock.
"Overall, we are pleased with Windows 8," Haydock said. The devices "have performed within our expectations of the launch. We have also seen increased computing traffic to our stores and online."
With its radically designed interface, Windows 8 may also offer Best Buy the chance to do what it normally does best: explain complicated technology to consumers. Von Walter said the company devoted 50,000 hours training Blue Shirts on the new technology.
Nonetheless, Windows 8’s disappointing debut can’t please Best Buy. There’s nothing necessarily wrong with Windows 8, Baker said. It’s just that Windows 8 has so far failed to reverse in any small way the continuing decline in PCs and notebooks, he said, which make up a big chunk of Best Buy overall sales.
“Windows 8 is not the problem,” Baker said. “Computers are the problem.”
We can all use a little extra cash during the holidays or just after the holidays when bills start arriving. One of the easiest sources of found money in the next week lies in any flat screen TVs, computer monitors, or laptops you purchased between January 1999 and December 2006.
Because companies such as Hitachi, LG, Sharp, Samsung and Toshiba were found guilty of price fixing, consumers can get a minimum of $25 to $100. But amounts could easily rise to $250 per LCD screen, depending on the number of people who file a claim, said Alison Buckneberg, communication specialist at Gray Plant Mooty in Minneapolis, one of a dozen law firms that managed the $1.1 billion settlement in a San Francisco U.S. District Court.
This settlement is considered one of the most consumer friendly settlements ever because claimants do not have to show proof of purchase or even identify the manufacturer or model number. Even better, consumers are eligible for cash rewards, not a rebate on a future purchase.
So far 18,000 Minnesotans have requested a claim, which is among the highest number of claims of any state, exceeded only by California and Wisconsin. Twenty-four states are included in the settlement.
Buckneberg expects people who file claims to receive checks early in 2013.
To file a claim, go to LCDclass or call 1-855-225-1886 by Dec. 6.
With his investors and financing largely in place, Best Buy founder Richard Schulze wants to wait until after he sees Best Buy’s Black Friday weekend numbers before offering to buy back the company.
So how did Best Buy do? A Deutsche Bank analyst declared Best Buy to be the weekend’s “big winner” after reporting that 86 percent of stores it surveyed said they were “busy.”
That’s hardly scientific. And lots of traffic doesn't always or necessarily translate into real sales and profits, which is what Schulze wants to know.
The company provided a little more color:
1. Driven by exclusives and competitive pricing, three key categories – mobile phones, laptops and e-Readers – all exceeded Best Buy’s full-day hardware projections by 3 p.m. central time Black Friday.
2. The post-paid phone business online this year was 4-times better than what we did last year.
3. We broke records on BestBuy.com last Thursday and Friday. Thanksgiving day was our biggest traffic day online last year and we were anticipating the same this year. Looks like that bore out.
Best Buy also confirmed an earlier tweet from executive vice president Stephen Gillett that bestbuy.com sales on Nov. 20, the start of its early access online event for Reward Zone members, jumped about 400 percent from the same day the previous year.
What the company didn't say was how it did in televisions and desktop computers, two weak categories that form a big chunk of Best Buy sales.
Also a National Retail Federation report found that 37.7 percent of consumers it surveyed during Black Friday weekend said they purchased consumer electronics or computer related accessories, down from 39.4 percent in 2011.
Interestingly enough, the same survey found more people visited an electronics store and more people bought CDs, DVDs, and video games.
So when the numbers all add up, I suspect the status quo will largely remain unchanged for Best Buy: strong growth in online, tablets, smartphones, and e-readers but weak sales in televisions.
My only question would be the impact of Windows 8 on laptops and desktops, something I will try to answer later in December.
Anyone who has ever read this blog knows that I'm not a big fan of Black Friday (or shall we say Black Thursday night). The crowds, the noise, the sheer nakedness of American capitalism on display for the world to admire or mock.
But even I got a little rush waiting for the doors open at the Target store in Bloomington. About 50 people waited outside before the doors opened at 9 p.m., hardly a mob. In fact, I've seen more three times as many people line up outside of Best Buy in Roseville around 4 a.m. a few years ago. Go figure.
Ten minutes before the store opened, a Target manager tried to lead the store employees in a mini-rally but was quickly interrupted when some moron knocked over a bunch of DVDs. That moron would be me.
Making matters worse, Target CEO Gregg Steinhafel witnessed the event, the second time I embarrassed myself in front of the man. (More details in a later blog post).
"I'm glad I'm not you," a Target spokeswoman whispered to me.
Thanks much. I feel better.
Speaking of Steinhafel, I spoke to the CEO for a few minutes. We'll post some of our video later on startribune.com. Steinhafel seemed to be in a good mood, as any CEO would be when customers are about to tear the store apart on Black Friday.
But this year will be slightly different. Steinhafel is hoping to extend the sales momentum Target usually gets on Black Friday all the way to Christmas. Normally, people would buy up stuff the day after Thanksgiving and the wait until a few days before Christmas before crowding the stores again.
Beginning on Dec. 1, Target is launching an extensive collaboration with Neiman Marcus that features exclusive merchandise, including clothing, accessories, and even a bicycle, from dozens of prominent designers. Steinhafel says he's confident the collection will keep shoppers in Target stores throughout the holiday shopping season.
Target also has high hopes for its digital efforts. In addition to a bug free website, Target has installed free Wi-Fi throughout its stores (I'm using it right now) and QR codes on select merchandise. Shoppers can scan the QR codes with their smartphones and find more information online. They can even compile their own digital shopping list. Customers can also find the QR codes outside the stores on bus shelters and buy the item right there.
Until now, Target has never really been known as a high tech retailer. Steinhafel hopes that will change this year.