Best Buy CEO Brian Dunn resigned Tuesday morning, The Verge reports :
Best Buy CEO Brian Dunn has resigned after a three year run, and it appears to be an amicable split: Best Buy's board of directors says there was "mutual agreement" on the decision, and that it didn't disagree with Dunn and the company on its management. The board has selected G. Mike Mikan as an interim CEO, and says that it is "time for new leadership to address the challenges that face the company." And Best Buy's challenges are substantial — the company posted a $1.7 billion quarterly loss in its fiscal fourth quarter 2012, and announced recently that it plans to close 50 US stores as part of a cost-saving restructuring effort. The end of the road for Dunn at Best Buy comes after 28 years with the company and a start as a salesman.
Dunn's interim successor says that he will be "extremely focused on successfully managing this period of transition," that will shed the company's retail footprint in the US by 20 percent, and cut a number of staff from Best Buy's corporate headquarters. The move is intended to save Best Buy $800 million in costs, but it's not yet clear how the company plans on competing with internet giants like Amazon that have squeezed big box retailers with fierce competition.
The announcement comes as the tech retailer “struggles to regain its footing,” the Associated Press reports:
Best Buy lost $1.23 billion in the last quarter and revenue at stores opened at least a year, a key metric, dropped 1.7 percent for the year after having fallen 1.8 percent in the prior year.
The company has been hit hard by a number of factors. Once the bread-and-butter of electronics retailers, sales of TVS, digital cameras and video game consoles have weakened. Meanwhile, sales of lower margin items like tablet computers, smartphones and e-readers have increased. At the same time, Best Buy, like other big-box retailers, is finding that more people are using its stores as showrooms to browse for products and then going online to Amazon.com and other rival sites to buy at a lower price.
As a result, Best Buy is trying to become nimbler and avoid the fate of former rival Circuit City, which liquidated its business in 2009. A couple weeks ago, Best Buy, which has about 1,400 stores in the U.S., unveiled a restructuring plan that calls for it to close 50 of its U.S. big-box stores, open 100 small-format stores and cut $800 million in costs over the next five years.
The plan comes after Best Buy has made some inroads in the past year. The company has cut its square footage by 15 percent in about 43 stores. It did that by either subletting the space to other merchants or giving it back to the landlords.
But some analysts say Best Buy hasn’t moved fast enough to reduce its foot print. They also say there are more opportunities for Best Buy to take advantage of its mobile business.
Gary Balter, an analyst at Credit Suisse, says Best Buy’s mobile business accounts for nearly one-third of the retailer’s profits, yet it accounts for less than 10 percent of the overall square footage.
News of Dunn’s resignation also comes a day after Sony announced that it was cutting 6 percent of its workforce and on the day that the Japanese company more than doubled its annual net loss projection. The Associated Press reports :
Sony Corp. more than doubled its projected annual loss to 520 billion yen ($6.4 billion), its worst red ink ever, due to a massive tax charge.
With new CEO Kazuo Hirai at its helm, the Japanese electronics company said Tuesday it expects an additional tax expense of 300 billion yen in the fiscal fourth quarter ending March 30. It said this non-cash charge stemmed from revaluing U.S. tax credits that are unlikely to be utilized due to its string of annual losses.
In February, it had projected an annual net loss of 220 billion yen amid weak TV sales, the strong yen and production disruptions from flooding in Thailand.
The company said its operating loss forecast was unchanged at a loss of 95 billion yen ($1.2 billion). It forecast a return to profit in the year through March 2013.
Japanese news reports on Monday said Sony would cut about 10,000 jobs worldwide over the next year as it tries to return to profit, but the company would not confirm that.
This would be the fourth year of red ink for Sony — a daunting challenge for Hirai, who took over as CEO from Welsh-born Howard Stringer this month. Hirai is due to outline the company’s new corporate strategy to journalists on Thursday.
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