Best Buy Falls as Key Executive McCollam Plans to Step Downby
McCollam had brought retail experience to executive team
Second-quarter profit forecast trails analysts’ estimates
Best Buy Co. fell the most in four months after forecasting second-quarter profit that trailed analysts’ estimates and announcing the departure of Sharon McCollam, who helped revamp the company’s operations and cut costs.
McCollam, 54, will step down as chief financial officer and chief administrative officer after the company’s annual meeting in June, Best Buy said Tuesday in a statement. Best Buy veteran Corie Barry will succeed McCollam as CFO, and the administrative-officer duties will be distributed among several executives.
The departure unsettled investors at a time when Best Buy has yet to return to consistent sales growth. McCollam, who previously served as chief operating officer at Williams-Sonoma Inc., came out of retirement to join Best Buy in 2012, providing retail experience for an executive team led by former hotel executive Hubert Joly. At Best Buy, McCollam has spearheaded efforts to improve the chain’s customer service and online operations while also selling off foreign divisions and overseeing more than $1 billion in cost cuts.
“Sharon McCollam and Hubert Joly have been instrumental in improving the business over the past 3.5 years, and we see Sharon’s departure as a sign that improvements from here could be limited,” Kate McShane, an analyst at Citigroup Inc., said in a note. She downgraded the stock to neutral from buy.
The retailer also said Tuesday that second-quarter profit will be 38 cents to 42 cents a share. Analysts estimated 50 cents. The forecast includes as much as 13 cents a share in negative impacts from the Japanese earthquake in April, carryover from last year’s services-pricing investment and lapping a periodic profit-sharing benefit. Best Buy reiterated its forecast that sales will be little changed this year.
The stock fell as much as 8.9 percent to $30.05 in New York, the biggest intraday drop since Jan. 14. Shares of the Richfield, Minnesota-based company had gained 8.4 percent this year through Monday.
However, the news wasn’t all glum for Best Buy. First-quarter profit was 44 cents a share, topping analysts’ 35-cent average estimate. And while sales fell 1.3 percent to $8.44 billion, that surpassed the average projection of $8.29 billion. Online revenue surged 24 percent.
Same-store sales fell 0.1 percent, a smaller decline than the 1.6 percent drop estimated by analysts surveyed by Consensus Metrix. Best Buy cited wearable electronics, appliances and home-theater gear as driving revenue. Meanwhile, sales of tablets and smartphones continued to be weak.
Joly recruited McCollam just a few months after he had joined the company in the midst massive losses and sales declines. Now that Best Buy is back on solid footing, she’ll be moving back to California, where her husband lives, Joly said.
McCollam has been grooming Barry to replace her since early in her tenure, Joly said. Barry’s experience includes serving as senior vice president of U.S. finance.
Barry “is an amazing leader,” Joly said. “A perfect CFO for Best Buy.”