The lower Manhattan skyline. Best Buy executives traveled to New York this week to present their plan for correcting the problems at the Richfield retailer.
Mark Lennihan, Associated Press
Best Buy CEO Hubert Joly
Brian Peterson, Star Tribune
Best Buy to Wall Street: We will 'Renew Blue'
- Article by: THOMAS LEE
- Star Tribune
- November 14, 2012 - 9:28 AM
NEW YORK -- Best Buy Co. Inc. CEO Hubert Joly dubbed his turnaround strategy "Renew Blue." However, some investors here were hoping for something more like "Reinvent Blue."
In a three-hour presentation to investors Tuesday, Joly offered no radical remedies to fix the struggling Richfield-based consumer electronics retailer.
Instead, Joly argued that Best Buy could significantly boost its immediate performance by correcting basic things like reducing product returns, moving some of its best store employees toward weekend shifts, and making sure stores don't run out of merchandise consumers want.
"While we need to [eventually] reinvent the business, there is some really good, low-hanging fruit" at Best Buy, Joly said. "The good news is that most of our problems are self-inflicted and we can and will fix them."
Best Buy had originally scheduled the investors meeting for Nov. 1 but had to scrap the event because of superstorm Sandy. The company ultimately decided to hold the meeting, which attracted about 230 or 240 analysts and investors, at the Best Buy Theater in Times Square.
Investors who had hoped Joly would outline a bold long-term strategy left the meeting disappointed, though several declined to comment publicly afterward.
Joly said his first priority was to stabilize the business. And that begins by jump-starting growth. Sales at stores open for at least a year, a key measure of retail performance, have fallen three out of the past four full fiscal years.
"I've only been here 10 weeks, and I'm already sick and tired of negative comp sales," Joly said.
Executives pointed to the company's lagging online business. Though BestBuy.com attracted about one billion visits in fiscal 2012, only 1.3 percent of those visits resulted in a sale.
Just boosting that conversion rate by one point could result in $250 million in additional operating income, the company said.
For some investors, Best Buy's focus on basic, incremental improvements makes sense.
"This isn't retail rocket science," said one executive with an investment firm that holds a stake in Best Buy. "It's completely unacceptable for a $50 billion company to have so much low-hanging fruit."
The source, who attended the presentation, requested anonymity because he was not authorized to speak to the media.
In the past, Best Buy made so much money that it could afford to leave some cash on the table, the source said. Not anymore.
But if the fixes are relatively obvious, why didn't Best Buy make them a long time ago? That's what David Strasser, an analyst with Janney Capital Management, asked the Best Buy executives.
Shawn Score, who was recently named head of Best Buy's core U.S. operations, blamed what Score said was the company's bloated bureaucracy and a culture that did not allow for quick decisions.
The company used to have eight business groups working on similar problems. Today, Best Buy has three.
And "we may not have had the best people" to make these decisions, Score said.
But for all of Best Buy's mistakes, the company is in far better shape than Wall Street thinks, Joly said.
He later told reporters that he wanted to hold the meeting to push back against critics who say Best Buy is on the verge of extinction.
"There are people who think Best Buy is dying," Joly said. "Look, no one likes negative comp sales. But that doesn't mean the world is falling apart.
"I like the set of cards I have at Best Buy," he said.
Thomas Lee • 612-673-4113
© 2017 Star Tribune