Top Geek Squad executive to leave Best Buy

The executive in charge of Geek Squad is leaving Best Buy Co. Inc. as the company shifts most of its attention to fixing store operations, reducing costs and revamping BestBuy.com.

George Sherman, senior vice president of services, will depart the Richfield-based consumer electronics retailer after nearly four years in the position, the company confirmed Monday.

"We wish him well," spokeswoman Paula Baldwin said in an e-mail. She declined to disclose the exact date of Sherman's departure or when Best Buy plans to name a replacement.

Under Sherman, a former executive at Home Depot and Target Corp., the company aggressively expanded Geek Squad beyond its core business of providing technical computer support to Best Buy consumers. Just last year, Best Buy formed an alliance with Car Toys, the country's largest independent car audio and mobile electronics retailer, to target car dealerships, commercial fleets and insurance companies. The company has also flirted with the idea of Geek Squad agents advising homeowners on how to conserve energy. Geek Squad agents even serve shoppers in some Target stores.

But since CEO Hubert Joly joined Best Buy last fall, the company has pivoted back toward retooling its stores and online operations rather than exporting Geek Squad services to outside markets. Joly told analysts last month that he wants to integrate the Geek Squad website with BestBuy.com and its Reward Zone site.

Joly has rarely spoken of Geek Squad to Wall Street except in the context of improving the in-store experience. For instance, the company's next generation "Connected Stores" feature Geek Squad agents staffing a central area reminiscent of Apple's Genius Bars.

"There may be some basics that Best Buy needs to address, such as ways to really make the stores more productive," said Laura Kennedy, an analyst with Kantar Retail consulting firm in Boston. "The truth is that they need to make in-store service more of a priority than Geek Squad right now. While it would be nice to get some customers from serving them in their home, you have to get customers to the store."

Best Buy officials often say Geek Squad was the best acquisition the company ever made. The retailer used to offer customers tech support using store employees, known as Blue Shirts, but it had little success. All that changed in 2002 when Best Buy purchased the little-known computer repair firm founded by Robert Stephens eight years before. Stephens left Best Buy last year.

Over the past decade, Geek Squad has been a cash cow for Best Buy. The company does not disclose separate financials for the business, but analysts estimate Geek Squad generates a gross profit margin of 40 to 50 percent based on a minimum annual revenue of $2 billion, or about 4 percent of Best Buy's total revenue of $50 billion.

But as Best Buy's core businesses of television and computers slowed, former CEO Brian Dunn and former interim CEO G. "Mike" Mikan searched for other ways to generate revenue from the Geek Squad name. At Best Buy's annual shareholders meeting last June, Mikan spoke of expanding Geek Squad services while reducing store space. Last year, the company closed 50 big-box stores.

Joly, however, seems to have taken the opposite stance from his predecessors. Even though he pledged to reduce costs by $700 million over the next few years, Joly ruled out dramatic reductions of the company's store base in the United States.

When Best Buy recently laid off 400 employees from its corporate headquarters, the company took pains to say that cuts would not target its stores and Blue Shirt employees.

Still, Joly could eventually turn his attention to services. In the company's "Renew Blue" presentation to Wall Street, Best Buy estimates it can generate $300 million in additional operating income from boosting store performance. As for services, the company listed the opportunity as "TBD," or To Be Determined.

Thomas Lee • 612-673-4113