A Case for the Ouster of Best Buy’s CEO

Investing

Published: September 14, 2011 6:34 am

Last Updated: September 14, 2011 7:08 am

Best Buy needs new leadership. The current CEO, Brian J. Dunn, has had his chance to turn the company around.

Nearly every news report about Best Buy’s (NYSE: BBY) poor earnings carried the same refrain: the largest electronics retailer in the U.S. cannot effectively compete with Amazon.com (NASDAQ: AMZN) on price or convenience. The evidence is that revenue was flat at $11.3 billion in the last fiscal quarter. Per-share earnings fell 22% to $0.47. Comparable-store sales for the period were down 2.3%.

All of these figures can be set in contrast to those of Amazon, where sales were up 51% in the most recently reported quarter to $9.1 billion.

Dunn has been CEO of Best Buy since 2009. He is a classic case of a chief executive who has been with his company for most of his adult life. He joined Best Buy in 1985. Dunn owes his position in part to founder and chairman Richard M. Schulze, who himself has been with the company since 1966.

The board of Best Buy has very few places to turn for a CEO better able to fix what is wrong with the company. The candidate would have to be someone with impressive online credentials, or someone with a much more successful record running retail operations. JCPenney (NYSE: JCP) recently hired the head of Apple’s (NASDAQ: AAPL) retail operations to become its CEO. Best Buy may use that as a template.

Amazon and eBay (NASDAQ: EBAY) may be best places to turn for CEO candidates. Amazon has eight senior vice presidents who have operating experience. While eBay has fewer, almost any of them would have a better chance to improve Best Buy’s prospects that Dunn does.

Dunn has had his chance, and the Best Buy board should admit that.

Douglas A. McIntyre

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