David Joles, Star Tribune
Best Buy short on specifics
- Article by: THOMAS LEE and WENDY LEE
- Star Tribune staff writers
- June 21, 2012 - 9:41 PM
If investors attending Best Buy Co. Inc.'s annual shareholders meeting Thursday expected more clarity about the company's future, they left disappointed.
On top of Richard Schulze being a no-show, there was little mention of the founder and ex-chairman, who is said to be exploring a private buyout of the company. Best Buy executives also didn't offer specifics of the long-term growth plan they plan to unveil later this summer.
While the meeting was a chance for the company to clear the air, experts say the vagueness was appropriate.
"There's some logic to keeping the temperature down and not creating more energy," said Carol Spieckerman, president of Newmarketbuilders, a retail consulting firm. Given its recent drama, "taking a little air out of the situation and then go home for the day is an understandable strategy."
Nevertheless, after the meeting Thursday the board approved a change to its bylaws that would make it harder for Schulze, who owns 20 percent of the shares, to take the company private. A shareholder now needs to own at least 25 percent of the company's stock to call for a special shareholders meeting to discuss such a buyout. The board did not bring this up at the annual meeting.
What Interim CEO G. "Mike" Mikan did offer at the meeting was a few clues to its future strategy: Best Buy will focus less on building big- box stores and more on offering services to consumers and small businesses.
"Improving the customer experience, delivering the best price, and strengthening our technology expertise are key to our strategy of reversing the practice of 'showrooming,'" Mikan said, referring to the practice of customers coming to stores to look at merchandise that they later buy online. "Ending that trend is a top priority for our team," he said.
Best Buy plans to provide intensive customer service training to 50,000 employees before the key holiday shopping season in an effort to personalize the technology experience for customers.
Spieckerman said Best Buy's store employees need to be retrained.
"Showrooming is uniquely an Achilles' heel for the consumer electronics retailer," Spieckerman said. Best Buy is thinking, "'If we get the customer in the door, we've got to close the sale.' But there is a perception that Best Buy is very agenda-driven, that it only wants to sell customers what it wants to sell them versus what they actually need."
Top executives also finally mentioned the "A" word, as in Amazon.com, the online retail giant that has made Best Buy's traditional big boxes less relevant and less profitable. Best Buy has rarely acknowledged Amazon, a silence that prompted one shareholder to ask: Is Amazon even a competitor?
"Yes, it is," Mikan said. "They have a formidable technology platform" that Best Buy wants to emulate.
But Amazon pays virtually no sales tax, which allows it to offer lower prices, Mikan said. And while Amazon pioneered free shipping, Best Buy's focus on product selection and availability will "always beat free shipping," said Stephen Gillett, executive vice president and digital chief.
While the meeting was mostly a placid affair, several shareholders voiced skepticism once it was over.
"What they said today sounds great," said Mark Bradley, 60, of Maplewood, who has invested in Best Buy over several years. The question is in "the application of it."
"They have a problem with where they are and where they are going," he said.
Michael Freier, who owns more than 100 shares of Best Buy stock, questioned the company's plan to spend more money on training workers. Customers are coming into stores looking for a good deal, not necessarily better customer service, he said.
"I think there's a lot of nervousness among shareholders that it could go the way of Circuit City," which eventually filed for Chapter 11 bankruptcy, said Freier, 63, of Bloomington.
And while no one brought up Schulze, he wasn't far from shareholders' minds.
Schulze was supposed to resign as chairman Thursday and leave the board next year, but he resigned two weeks ago, saying he'd "explore all available options" with his 20 percent stake in the company. He has hired a prominent New York lawyer and Credit Suisse, an investment bank that specializes in leverage buy outs.
Don Mykleby, 80, said if Schulze offered at least $30 per share, he would consider selling his 2,000 shares.
"It would be OK if the price is right," Mykleby said.
Staff writer David Shaffer contributed to this report. Thomas Lee • 612-673-4113 Wendy Lee • 612-673-1712
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