With the economy in turmoil and its headquarters facing hundreds of job losses, Best Buy Co. Inc. is handing control of the company to a new chief executive officer.
Brian Dunn, 48, a Best Buy veteran and the company's current president and chief operating officer, will take charge of the Richfield-based consumer electronics retailer on June 24, the company said Wednesday. Brad Anderson, 59, who has been CEO for the past seven years, will retire.
Dunn will take over the nation's biggest consumer electronics retailer at a time when consumers are beating a retreat from store after store. Best Buy has reported several months of same-store sales declines, and earlier this month reduced its earnings outlook for the year. In mid-February, it will cut about 500 workers at corporate headquarters.
While Dunn will face the challenge of retrenching at a time of great uncertainty, it's also a time of opportunity. Best Buy's biggest competitor, Circuit City, announced on Friday that it would close all of its 567 remaining U.S. stores and go out of business in the coming months.
While Best Buy's sales might take an short-term hit as consumers seek close-out deals at Circuit City, analysts believe Best Buy will quickly grab market share, though it will continue to duke it out with Wal-Mart, Costco, Target and Amazon for such items as TVs, video game systems and MP3 players.
"Best Buy has navigated this year pretty well, considering," said Thomas Paulson, a retail analyst with Cornerstone Capital Management in Minneapolis. Still Anderson's surprise retirement announcement raised questions. "What people don't know is how much of a fight Brad [Anderson] saw coming and didn't want to slog through it, versus how much he thought we'd see better times ahead," Paulson said.
Best Buy characterized the move as "part of the company's succession plan," though the stock took a hit early in the day and discussions with analysts indicate that few outside of Best Buy's inner circle knew the change was coming. Shares ended the day up 8 cents at $27.31.
"I'm expecting a smooth transition," said Brady Lemos, an analyst with Morningstar in Chicago. "Operationally, which is Dunn's background, the business is as strong as it's ever been -- even though the industry is pretty sick. I expect a fairly long adjustment period before sales turn around ... and this environment is making them be leaner and more efficient."
Dunn will be only the third Best Buy CEO, following Anderson and company founder Richard Schultze. Dunn worked his way up from the sales floor, joining the company in 1985, when there were only a dozen stores. Within 15 years he had risen through the ranks to become a senior vice president. In recent years, he has been part of the company's expansion efforts in North America and internationally. He was named to his current post in 2006.
"We all have gifts in life, and Brian has the gift to connect with people -- to inspire them and give them confidence," said Darren Jackson, who left an executive position at Best Buy a little more than a year ago to become CEO of Roanoke, Va.-based Advance Auto Parts. He said Dunn likely had been groomed for the job for a number of years.
"Naming Brian to be next CEO has everything to do with what Brad believes the company needs at this point of its journey," Jackson said. "At this point, it needs a spectacular people leader."
'Not a bad time to join them'
Anderson told analysts he was turning over the company with "mixed emotions," but that Dunn was up to the task of leading the firm into its next phase of growth.
Anderson said he wanted to "work less and spend more time with family." And with hundreds of employees leaving, "I think it's not a bad time to join them," he said.
Anderson joined Best Buy in 1973, also working his way up from the sales floor. He became the key driver for the company's shift away from a strategy that pushed high-tech gadgets to one in which consumers' needs become the core focus -- a mission it called "customer centricity." The strategy led Best Buy to expand its Geek Squad computer services as well as add a host of other services, from installing home-theater systems to setting up smart phones in the stores.
Under Anderson, Best Buy's annual sales increased from $17.7 billion in fiscal 2002 to $40 billion in 2008. Earnings grew at an average of 16.5 percent a year. The company expanded from almost 600 stores in North America in fiscal 2002 to nearly 3,900 locations in 13 countries.
Anderson will serve out the remainder of his term as vice chair of the board, retiring in 2010. Dunn is expected to be appointed at that time. No decision has been made on filling Dunn's position.
Best Buy joins several other retail giants that have made leadership changes in the midst of the worst slowdown in consumer spending since World War II. Gregg Steinhafel took over Minneapolis-based Target last May after working alongside predecessor Bob Ulrich for nearly 30 years. Going into the holiday season, Wal-Mart said it would replace H. Lee Scott after eight years with Mike Duke, who has run the company's international operations, starting Feb. 1.
"People view transitions in retail space with apprehension, and that's not necessarily a comment on Mr. Dunn," said Paulson. "I'd expect people will take a wait-and-see perspective to see how things go for the next year."
Dunn said he found out about his promotion at a recent board of directors meeting, and that "discussions around succession were becoming more focused and deliberate" in the past two months. Though he wasn't surprised at getting the nod, he said he wasn't counting on it, either.
He credited Anderson with being a strong mentor and friend, joking to analysts that the past 2 1/2 years had been "the most fun and the least fun. Life is a paradox."
As for the road ahead, Dunn said in an interview that he has no illusions.
"No doubt, globally we haven't seen anything quite like this," he said. "In turbulent times strong brands, strong companies and strong societies come out of this stronger. And we will, too."
Jackie Crosby • 612-673-7335