Best Buy CEO Says Employee Training Key to Reviving Stores
Best Buy Co.’s (BBY) new Chief Executive Officer Hubert Joly plans to focus more resources training employees at the world’s largest consumer-electronics retailer after an uneven performance among stores led to sales declines.
Training across various departments is aimed at making store employees “an undisputed point of reference” for customers, Joly said yesterday in an interview. He succeeded interim CEO Mike Mikan this month and spent his first three days on the job working in stores and made a house call with Geek Squad technicians to calibrate a television.
Joly, 53, is tasked with overseeing a turnaround at Best Buy as the retailer heads for its first annual revenue decline as rivals including Amazon.com Inc. (AMZN) grab customers. Best Buy’s same-store sales in the second quarter sank 3.2 percent after shoppers bought fewer televisions and notebook computers.
“We’ve got to stop the comparable-store sales decline,” Joly said by telephone from Minneapolis. “Across our stores, we have a wide range of performance. Leadership and quality of execution make a huge difference at the local store level. If we can improve our execution across the system, there is significant upside.”
“The situation requires urgent action, not because there is a fire but because this is a very competitive world,” Joly said.
Founder Richard Schulze, seeking to take Best Buy private, reached an agreement with the board last month allowing him to conduct due diligence and bring a fully financed, definitive proposal to the company within 60 days. After stepping down as chairman in June, Schulze offered on Aug. 6 to take the retailer private at $24 to $26 a share.
“At the end of the day, he may or may not make an offer and that offer may or may not be accepted by the board or the shareholders,” said Joly, who says he doesn’t know Schulze, 71. “In any event, Dick Schulze is the largest shareholder of the company, be it in the public setting or the private setting. In many ways, all of us work for Dick Schulze and this great company.”
The challenge for Joly or Schulze is figuring out how to spend more on employee training and lower prices while boosting profit, said Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York. Joly has about five months to pull it off, he said.
Joly’s “basically got until January to lay it all out, make a credible case and hopefully start to show some progress so he can convince shareholders not to sell their stock to Dick,” said McGranahan, who rates Best Buy as market perform, equivalent of a hold rating.
Best Buy disclosed the departure of CEO Brian Dunn in April amid a board investigation into his “personal conduct.” Interim CEO Mikan took over after Dunn’s resignation.
Revenue may decline 2.6 percent to $49.4 billion this year, according to the average estimate of 20 analysts surveyed by Bloomberg. The company had increased annual revenue every year since it started trading on the Nasdaq Stock Market in 1985, according to Sue Busch, a company spokeswoman.
Joly said he wasn’t looking for a new job when contacted by Best Buy. Since 2008, he had been CEO of closely held Carlson Cos., a Minneapolis-based operator of hotels, restaurants and a travel company. Under his tenure, the company implemented initiatives to boost revenue from the Web, which was attractive to Best Buy directors, Joly said.
“There’s a great deal of similarity between retailing and hospitality,” he said. “The role of the general manager in a store is very analogous to the role of the GM in a restaurant or hotel.”
From 1999 to 2001, he oversaw the restructuring of Vivendi SA’s (VIV) video-game business, which is now part of Activision Blizzard Inc. (ATVI), Best Buy said. His experience in the technology industry also includes a stint at Electronic Data Systems Corp. in France. He also serves as a director of Ralph Lauren Corp. (RL)
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