Quickly Removed From The Top Shelf: Best Buy's CEO
We’re inclined to go along with Phil Rosenthal’s take on the resignation of Best Buy CEO Brian Dunn yesterday. The Chicago Tribune columnist says it “occasioned an existential quandary of sorts, what with the consumer electronics chain already in adapt-or-die mode because of, well, consumer electronics.”
And then, without ado, Rosenthal contemplates the possible hereafter: “If it becomes necessary to bury the big-box stores, where will they be able to buy a coffin large enough? And will they be able to resist the urge to shop for that bigger box online?”
Let’s push the clock back a couple of weeks and look at how another of our sagest sources of philosophical punditry, the New York Post, summed up Dunn’s quandary-of–the-moment, which was “Battered Best Buy’s Big Boxes Too Darn Big.”
Contemplate that for a moment. Talk about a Gordian Knot; the horns of a dilemma. Big is your essence. Big is your problem.
“Looking to avoid the fate of rival Circuit City, which closed its doors in 2009, the struggling retailer said it’s closing 50 of its 1,100 stores -- a move that many critics called long overdue and some called too little, too late,” the Post’s James Covert wrote on March 30.
“We’re clearly going to have more doors and less square footage,” Dunn said as he revealed his plans to cut $800 million in operating expenses and use the savings to train sales associates.
But Dunn and Best Buy were dealing with a different problem yesterday –- an unspecified “personal” one. After leaving shareholders (and reporters) dangling as to the whys and wherefores of Dunn’s abrupt departure from HQ for much of the day, the company issued a late statement:
"Certain issues were brought to the board's attention regarding Dunn's personal conduct, unrelated to the company's operations or financial controls, and an audit committee investigation was initiated. Prior to the completion of the investigation, Mr. Dunn chose to resign."
Speaking of pithy insights (and mind over what really matters), the hed atop Maureen O’Gara’s SYS-Con Media story reads: “Ah, Scandal at Boring Old Best Buy,” followed by, “Imaginations can now run rampant since the company won’t explain what it’s talking about.”
While our imaginations take their diversionary paths, let’s take a look at the very real problems confronting all those Best Buy bricks held together by mere mortar and how Dunn’s resignation may be a good thing for Best Buy in the long run.
Dunn was a 28-year veteran who had risen through the sales ranks and was something of a folk hero among employees. "He was true blue," one source told the Wall Street Journal -– which, Miguel Bustillo writes, is “a nod to Best Buy's on-floor salespeople, known as the blue shirts. Mr. Dunn's mother was one of the retailer's earliest employees.”
But that adulation didn’t necessarily carry over to outside observers, who feel that Dunn didn’t have the chops to combat online retailers, such as Amazon, and more innovative retailers, such as Apple, and was perhaps a little too blithe about the threat of “showrooming.”
"While we know 'showrooming' happens, we continue to be the No. 1 player in consumer electronics," Bustillo recalls that Dunn said in an interview just last month. "Really, if a customer comes into our store to see something, I like our odds."
On that note, the Journal’s Ann Zimmerman has a story this morning about the more aggressive strategies retailers such as Target and Walmart are employing to “thwart” the practice.
Sanford C. Bernstein analyst Colin McGranahan writes that "some investors had been frustrated with Dunn's tenure, given his strong affinity for physical retailing and perceived slowness to adapt to threats facing the company," Stephanie Clifford points out in the New York Times.
Another source tells Clifford, by the way, that we should be careful about what we imagine. “We sometimes make assumptions that investigations mean it must be bad, and investigations sometimes end with the conclusion that it wasn’t,” says Larry C. Drapkin, co-chairman of the labor and employment practice at the law firm Mitchell, Silberberg & Knupp.
"I hate to be rude, but I think he [Dunn] was doing a terrible job,” Wedbush Securities analyst Michael Pachter tells Reuters’ Dhanya Skariachan “This is a company that had a sales guy in charge, and I just don't think they are well positioned to deal with the onslaught from the Internet."
G. Mike Mikan, former EVP and CFO UnitedHealth Group and a Best Buy board member since 2008, is serving as Best Buy’s interim CEO. No one is predicting that he’ll stay in that position for very long, although Claire Koeneman, an external spokeswoman for Best Buy, maintains he will be considered for the job.
“I don’t think [Mikan] adds any value at all,” Pachter tells CFO Journal’s Maxwell Murphy, saying he “has zero retail experience, has no relevant experience in dealing with a threat from Internet retail, and is unlikely to make any meaningful changes.”
Pachter is clearly not one for existential rumination.