Former CEO Anderson and ex-president Lenzmeier will represent him on the board.
Best Buy is ending founder Richard Schulze’s 10-month corporate exile, completing a reconciliation from his ousting last year and unsuccessful quest to buy the company.
The Richfield-based retailer said Monday that Schulze will become chairman emeritus, an advisory position with no formal role. Two of his trusted lieutenants, former Best Buy executives Brad Anderson and Al Lenzmeier, will join the board immediately.
“I feel good about where we are today,” Schulze said in an exclusive interview with the Star Tribune. “All of us are now locked together. I’m excited about what’s possible.”
The accord with Schulze, who co-founded Best Buy in 1966 and remains its largest shareholder, could herald a new period of boardroom harmony as the company tries to regain its luster in the face of growing competition.
As recently as last month, Schulze was working with a group of private equity firms to increase his influence at the company, perhaps by buying an additional stake. Now, Schulze’s new role aligns him with CEO Hubert Joly’s vision for reviving the world’s largest consumer electronics retailer.
“The level of drama and uncertainty is declining,” said Colin McGranahan, a retail analyst with Sanford Bernstein. “In a turnaround situation, you want a stable foundation from which to execute, and they’re creating that.”
Joly has spent months courting Schulze and his ideas, openly praising him to analysts and the media as he crafted a turnaround strategy. Joly’s plan, dubbed Renew Blue, aims to improve the performance of its 1,000 stores in North America.
“We can now focus our entire energy on Best Buy,” Joly told the Star Tribune in an interview. “One team, one dream. One dream, one team.”
Schulze made an unceremonious departure from Best Buy in the wake of scandal, after then-CEO Brian Dunn resigned amid allegations that he misused company resources in an affair with a female employee. An outside investigation later concluded Schulze knew of the allegations but failed to inform the board.
With a 20 percent stake in Best Buy, Schulze enlisted Anderson, a former Best Buy CEO, and Lenzmeier, an ex-president and vice chairman, in his buyback effort. The three arguably were most responsible for Best Buy’s past success and recent struggles, but they cast themselves as the only men who could rescue the company from oblivion.
Schulze ultimately failed to submit a buyout bid by the Feb. 28 deadline.
Analysts said having the three back in the corporate fold gives the company more flexibility than if Schulze’s buyout deal had come together. Under that scenario, much of the free cash flow would have gone to pay off debt, limiting the ability to invest in the business and take necessary risks.
“Regardless of what has happened here, Dick Schulze is the heart and soul of this company,” said David Strasser, of Janney Capital Management. “The company is changing. It’s going to change a lot more. If handled right, these links to the past are probably very helpful.”
Best Buy shares ended Monday up 1.84 percent, at $23.20, reinforcing investors’ growing confidence in Joly’s approach. The company’s stock has nearly doubled since Joly and his team began rolling out its turnaround strategy.
As part of the agreement, Schulze will collect up to $2.125 million for his help preparing a business plan for the company in the year ahead. He also will be paid a base salary of $150,000.
Anderson and Lenzmeier will stand for election at the annual shareholders’ meeting in June.
Joly, former chief executive at the Minnetonka-based global hotel and travel firm Carlson, arrived at Best Buy in September when the company was amid scandal and sales were plummeting. The company has struggled to boost sales over the past three years as more consumers fled to online retailers like Amazon.
McGranahan said Joly has demonstrated that he is a talented executive, but added that he lacks experience running a consumer electronics business.
Schulze, Anderson and Lenzmeier bring “decades of experience in this business to the table,” McGranahan said. “They’ve managed the business through multiple cycles, through ups and downs. They know what they’ve tried and what has and hasn’t worked in the past.”
But Carol Levenson, director of research at Gimme Credit, questioned whether it’s ideal for board harmony to have two distinct factions with differing loyalties.
“Besides,” she wrote in a research note, “these three gentlemen all had plenty of chances to turn around Best Buy when they were in charge, and its situation only deteriorated steadily.”
While Schulze and Joly have embraced their new alliance, they haven’t settled on a long-term vision for the company, according to a source close to the founder. So far, Joly has mostly focused on improving existing operations.
“There is a significant gap in thinking,” the source said.
But on this day, Best Buy and Schulze only spoke about unity and working together. Joly noted how “wonderful” it was to see Schulze chatting with employees during a recent visit at the company’s headquarters.
“His passion, wisdom and insight are legendary,” Joly said. “I look forward to his engagement as we move forward.”
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