He may have a honorary title but Richard Schulze reminded employees at Best Buy that he plans to be an active force in the company.
During an all-employee town hall meeting at its corporate headquarters in Richfield, Schulze, now chairman emeritus, offered a list of Best Buy's top ten priorities on a Power Point presentation, sources tell the Star Tribune.
One assumes that CEO Hubert Joly or even chairman Hatim Tyabji would perform that task. As chairman emeritus, Schulze acts an advisor to the company but his role seems considerably larger.
He gets monthly financial reports plus a briefing from CEO Hubert Joly and CFO Sharon McCollam every quarter. Not to mention a salary, health benefits, an office and secretary.
The meeting marked the first time Schulze, Joly, and Tyabji all shared the stage since Schulze left the company last year under a cloud.
The show of unity comes one day after former CEO Brad Anderson and former president and vice chairman Al Lenzmeier officially rejoined the board of directors as Schulze’s representatives.
That Schulze and Tyabji should even speak to one another, never mind share the same space, seemed unlikely a year ago when the board ousted Schulze as chairman after an investigation concluded the founder withheld allegations about then CEO Brian Dunn’s personal conduct.
After Tyabji replaced Schulze, the two briefly waged a battle of press releases after the board initially refused Schulze’s request for financial information so he could launch a buyout campaign.
Joly, Schulze, and Tyabji spoke about their reconciliation and took questions from employees.
“I’ve always had respect for our board,” Schulze recently told the Star Tribune. “They do believe in what’s best for the interest of shareholders.”
Best Buy founder Richard Schulze’s bid to purchase the company may have ended in disappointment but that doesn’t mean Schulze plans to go into exile anytime soon.
Last Friday, Schulze visited the retailer’s headquarters in Richfield and spoke at some length with CEO Hubert Joly, according to a source close to Schulze.
The company declined to comment.
Perhaps Schulze gave Joly some clue about whether he will rejoin the board of directors. He is entitled to fill the two board seats the company granted him because of his 20 percent stake.
Schulze, the source said, remains “disappointed” that he failed to retake control of the the company. After abandoning an outright buyout bid last month, Schulze and his private equity partners went to Plan B: Texas Pacific Capital, Cerberus Capital Management, and Leonard Green would purchase minority stakes in Best Buy, entitling them each to one board seat.
Combined with Schulze’s two seats, the allies would essentially control more than half of Best Buy’s 11-member board and perhaps restore Schulze back to chairman. But the board resisted Schulze’s campaign for chairman and ultimately rejected bids by the private equity firms to pay between $400 million to $700 million for minority stakes in the company.
In a regulatory filing, Schulze said he hasn't yet decided whether to fill his board seats. If he doesn’t nominate anyone, the company will nominate its own candidates.
As a director, Schulze would need to demonstrate a certain degree of obedience to Best Buy’s leadership. But as an outsider, Schulze could make yet another attempt at a later time to remake the board to his liking and reclaim his position as chairman, experts say.
The source close to Schulze said he “doubts” the founder will rejoin the board.
Nevertheless, Schulze seems to enjoy at the very least a cordial relationship with Joly.
After initially distrusting the Frenchman, Schulze has warmed up to Best Buy’s new CEO. Friday’s meeting marked the second time in recent months the two chatted in person. The day before Thanksgiving, Joly talked strategy with Schulze and former CEO Brad Anderson and former vice chairman Al Lenzmeier.
In the regulatory filing, Schulze said the company “deserves a chance to implement its own plan.”
Whether Schulze will have any direct role in that plan remains to be seen.
Okay, let’s first set the record straight.. The French equivalent of Target Corp. is not Chez Target (roughly pronounced shay tarjay). Someone invented the phrase to describe Target’s cheap chic esthetic.
Point of Sale only makes this point because of the issues that Target must confront as it prepares to open stores this year in Quebec, Canada.
To put it mildly, the province is quite protective of its French culture, particularly its language. In fact, Quebec law requires all business names be in French. That’s why Kentucky Fried Chicken is “Poulet Frit Kentucky” and Staples is “Bureau en Gros.”
Parti Quebecois, the conservative nationalistic party that runs the government, now wants to tighten the law to force retailers like Wal-Mart and Gap to either Frenchify their names or somehow add a French word to the brand. Since there is no real French equivalent for “Wal-Mart,” you can see how this can be problematic.
Last fall, Wal-Mart, along with Richfield-based Best Buy Co., filed a lawsuit seeking to block the government’s move. (A spokeswoman for Best Buy confirmed the company had joined the lawsuit but declined further comment.) The case is still pending.
Target officials would only say they are working with the local officials to respect the language law but also protect their brand’s integrity.
Target and Best Buy have good reason to protect their brands, in part, because they don’t particularly translate well into French.
Best Buy would be “Le Meilleure Achat.” Target translates into “cible,” “but,” or “objectif.”
Somehow, it just doesn’t sound the same.
Believe it or not but Best Buy is one of the best performing stocks of the year.
Okay, so the year is not quite two months old but given Best Buy’s recent turmoil, we should acknowledge the achievement just the same.
Since Dec. 31, BBY has smoked the broader S&P 500 index and competitors like Amazon and Apple. In fact, the only company that has performed better than Best Buy is Netflix. And Best Buy doesn’t even produce original shows.
No doubt investors’ new enthusiasm for Best Buy orginates from the company’s rosier sales outlook, thanks in large part to CEO Hubert Joly's Renew Blue strategy. Best Buy reported flat comp sales in December, a relatively strong performance that surpassed Wall Street’s expectations, and all signs point towards a strong January as well.
But there may be another, less quantifiable explanation for the stock’s rise: the “Sharon McCollam Effect.”
The company has hired or promoted several executives in recent months, including U.S. retail chief Shawn Score and e-commerce chief Scott Durchslag, a former president of Expedia.
But from Wall Street's point of view, Joly's best move thus far was to hire McCollam as chief financial officer and chief administrative officer. As a top executive at Williams-Sonoma, McCollam already commanded respect and admiration from Wall Street.
Since McCollam joined Best Buy in November, that love fest has only grown. Some investors even think Best Buy hired its most credible CFO in over a decade.
“Every time someone meets Sharon McCollam, the stock goes up,” said Dave Strasser, an analyst with Janney Capital Management.
Even the often-prickly Michael Pachter, an analyst at WedBush Securities and longtime critic of Best Buy, had warm praise for McCollam.
It’s hard to say how much of this goodwill comes from McCollam’s reputation, communication skills, or actual deeds. After all, she has only been on the job for three months or so.
But McCollam’s fingerprints have appeared on at least a couple of recent decisions. In January, Best Buy said that it made changes to the way it calculated the costs from its inventory. The move reduced Best Buy’s free cash flow estimate for fiscal 2013 but, in Wall Street’s eyes, demonstrated the company’s commitment to transparency and sensible accounting.
Best Buy also recently announced it will close 15 underperforming stores in Canada. As part of her large portfolio of duties, McCollam is in charge of “rationalizing” the company’s square footage, or in normal parlance, deciding which stores to close, which stores to relocate, and which stores to remodel.
This is a big responsibility. Barclays retail analyst Alan Rifkin estimates the company can save $125 million and add 25 cents a share to earnings if it reduces square footage over the next three years.
“We are encouraged that McCollam will manage the company’s real estate portfolio and believe that she will make positive changes given her highly successful tenure at Williams Sonoma,” Rifkin wrote.
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.
Best Buy’s Super Bowl ad, starring Amy Poehler, was a pleasant enough commercial, a mildly amusing spot that was neither controversial nor boring.
But then CNET’s Chris Matyszczyk gave his take on it:
“…the more she came on to the gorgeous, virginal men in the blue polo shirts, the more it was clear that this was an amusing fantasy,” he wrote. “Poehler was there to make women feel good about gadgets. And sex.”
Uh...did we watch the same spot?
I found the full length commercial online and watched it again. Here are some of Poehler’s more suggestive questions:
“Do you deliver? No, I mean do you deliver?
“Does it make you feel uncomfortable when I use the word dongle?”
“Do you want to unbutton your shirt a little?”
“Will this [e-reader] read 50 Shades of Gray in a sexy voice? Will you?”
Bad Amy Poehler!!!
Best Buy’s choice of Poehler, a Saturday Night Live and Parks & Recreation veteran, was a smart move. She exudes intelligence, wit, and confidence, the type of spokesperson that could help Best Buy move beyond its male-centric culture and woo female customers.
So in hindsight, it’s a little distracting to see Poehler hit on the Blue Shirt guy. Had Poehler engaged a female Blue Shirt (without the sexual overtones), the spot might have carried more punch.
Oh well. At least we didn’t see Poehler make out with a Geek Squad agent.