Best Buy talks end, source says; adjusted profit falls

NEW YORK, Fri Mar 1, 2013 — Best Buy Co. and founder Richard Schulze have ended their talks after Schulze and private equity investors sought three board seats in exchange for taking a minority stake in the company, a source familiar with the matter said on Friday.

Separately, the world’s largest consumer electronics chain posted quarterly results. Best Buy lost $409 million, or $1.21 per share, in the fourth quarter ended February 2, compared with a loss of $1.82 billion, or $5.17 per share, a year earlier.

On an adjusted basis, earnings from continuing operations fell to $1.64 per share from $2.18 a year earlier.

Revenue rose just 0.2 percent to $16.71 billion.

Schulze, who had made an informal proposal to buy Best Buy for $24 to $26 a share last August, failed to line up necessary debt and equity financing, the source said.

The founder’s efforts to negotiate a deal with private equity firms Cerberus Capital Management, TPG Capital and Leonard Green & Partners have also come to an end, the source said.

Best Buy profit misses estimates; same-store sales fall

RICHFIELD, Minn., Tue Nov 20, 2012 – Best Buy Co. Inc. reported a weaker-than-expected profit and its ninth same-store sales decline in 10 quarters, highlighting the challenges its new chief executive officer faces in trying to turn around the world’s largest consumer electronics chain.

The retailer, which faces cutthroat competition from the likes of Amazon.com Inc., Wal-Mart Stores Inc. and Apple Inc., said its net loss in the third quarter ended on November 3 was $13 million, or 4 cents a share, compared with year-earlier net earnings of $173 million, or 47 cents a share.

Excluding restructuring charges, the company earned 3 cents a share, far below the analysts’ average estimate of 12 cents, according to Thomson Reuters I/B/E/S.

Sales at stores open at least 14 months fell 4.3 percent, including a 4 percent decline at the company’s U.S. unit.

The news came just days before the unofficial start of the holiday season and amid a wide organizational restructuring under new CEO Hubert Joly and a looming buyout proposal by founder Richard Schulze.

Last month, the retailer had warned that earnings and same-store sales would show declines for its third quarter.

New Best Buy CEO sets long-term margin targets

RICHFIELD, Minn., Tue Nov 13, 2012 – Best Buy Co. Inc. is targeting an operating margin of 5 to 6 percent over time, the company said on Tuesday as its new chief executive unveiled his plans to turn the electronics retailer around.

In a statement ahead of an investor meeting, the company said its short-term goal will be “to stabilize and then begin increasing its comparable store sales and operating margin.” Over time, it is aiming for a return on invested capital of 13 to 15 percent in addition to the margin targets.

Best Buy also said it would pursue a number of priorities, including a plan to “optimize its store footprint on an ongoing basis,” which suggested the company may look at ways to shrink or close stores, as some other big-box retailers have done.

The new CEO, Hubert Joly, said in the statement that while the company had its strengths, it also had been too slow to grow online and suffered from the perception that its prices were too high compared with peers.

Best Buy shares were down 1.2 percent at $15.66 on Tuesday afternoon.

Best Buy’s new CEO wants to learn from the front line

NEW YORK, Tue Sep 4, 2012 – Best Buy’s new chief executive, Hubert Joly, will spend much of his first week on the job wearing a blue shirt and working the floor as a salesman at the chain’s stores in Minnesota as the restructuring expert tackles criticism that he lacks retail experience.

Just like any other new employee, Joly will be trained to serve customers, stock items, accept returns and go on calls with Geek Squad agents.

“The last time I worked in a store was in 1975,” Joly, 53, said in an interview with Reuters on Monday, one day before officially taking charge as CEO of the world’s largest consumer electronics chain.

“I want to not learn our businesses from the headquarters,” Joly said, “I want to learn from the front line.”

That’s not to say that he does not already have some plans for Best Buy, which is facing cut-throat competition from the likes of Wal-Mart Stores Inc. and Amazon.com, as well as a takeover attempt by founder Richard Schulze.

He said he plans to cut non-salary expenses and woo holiday shoppers with a three-pronged strategy of offering competitive prices, stocking the right amount of hot products and improving customer service. Joly declined to be more specific.

Best Buy could use some improvement in those areas. Last year, it struggled to keep up with online demand and failed to fulfill less than 1 percent of its customers’ online orders during the Thanksgiving holiday weekend and the following week.

In 2010, it made a bad bet on pricier 3-D televisions that customers did not embrace.

“There are a few areas where we will strive to do better,” Joly said. “We will not take anything for granted.”

Going forward, Joly also plans to take advantage of Best Buy’s clout with key suppliers by reaching out to them to develop “deeper strategic partnerships.”

“There are different ways to skin a cat in terms of a partnership. It can be exclusive (products), it can be unique shopping experiences, it can be deals, you know, a whole variety of things,” Joly said, without giving more details.

Best Buy cuts outlook, suspends buybacks

RICHFIELD, Minn., Tue Aug 21, 2012 – Best Buy Co. cut its fiscal-year profit outlook on Tuesday, citing lower expectations for industrywide sales and uncertainty about key product introductions, and the consumer electronics retailer suspended its share buybacks for the year.

Shares of Best Buy, which does not expect to further update its earnings outlook for the year, fell nearly 9 percent.

Best Buy also reported a decline in same-store sales – its eighth in the last nine quarters. That highlights the tough task ahead for new CEO Hubert Joly as he tries to engineer a turnaround at the world’s largest consumer electronics chain.

Sales at stores open at least 14 months fell 3.2 percent in the second quarter ended on August 4, including a 1.6 percent decline at the U.S. unit and an 8.2 percent drop internationally.

Net earnings fell to $12 million, or 4 cents a share, in the quarter from $150 million, or 39 cents a share, a year earlier. Excluding items, Best Buy earned 20 cents a share.

Shares of Best Buy fell 8.9 percent to $16.55 in premarket trading.

Joly was named Best Buy’s chief executive on Monday. The company is a bellwether for the consumer electronics industry.

Founder Schulze to Best Buy: “I am not going away”

NEW YORK, Thu Aug 16, 2012 – Best Buy founder Richard Schulze on Thursday repeated his call for the consumer electronics chain’s board to grant him access to the financial information he needs to secure financing for a bid for the retailer.

“I am deeply concerned about the direction of the company and, as Best Buy`s largest shareholder, I cannot simply stand aside,” Schulze said in an Aug. 16 letter to the board. “I still hope to work with the board on a mutually beneficial transaction – but you should know that I am not going away.”

The news came just days after sources told Reuters that several private equity firms that have been approached to join in a buyout of Best Buy are sitting on the fence, citing the lack of a tangible plan by Schulze, and doubts about his ability to pull off the deal.

Earlier this month, the 71-year-old Schulze expressed an interest in buying the struggling retailer for $8.16 billion to $8.84 billion, or $24 to $26 a share. Including the assumption of Best Buy’s debt, the total value would be $10.9 billion, making it the year’s biggest leveraged buyout so far.

“You can easily test how real my proposal is by granting me permission to form a group and by providing basic due diligence information necessary to present a fully financed offer,” Schulze said in a letter to the board of the world’s largest consumer electronics chain.

Best Buy founder offers to buy shares for $24-$26 each

RICHFIELD, Minn., Mon Aug 6, 2012 – Best Buy Co. Inc. founder and former Chairman Richard Schulze on Monday offered to buy the shares he does not already own in the electronics retailer for $24 to $26 each.

Schulze, who owns 20.1 percent in Best Buy and is its largest shareholder, said he has held talks with top private equity firms. His offer would value the firm at between $8.16 billion and $8.84 billion.

The offer would represent a premium of between 36 percent and 47 percent over Best Buy shares’ closing price on Friday of $17.64.

Best Buy shares up; former chairman said to be recruiting executives

RICHFIELD, Minn., Mon Jul 30, 2012 – Shares of Best Buy Co. Inc. rose 2.5 percent on Monday after a published report that founder and former Chairman Richard Schulze has been recruiting executives to lead the electronics retailer if he succeeds in a bid to take the company private. Bloomberg Businessweek reported on Monday that the executives Schulze is trying to recruit include a former Best Buy CEO, Brad Anderson.
Schulze has been working with banks, including Credit Suisse, to explore a potential private takeover of the world’s largest consumer electronics retailer, sources have told Reuters.
Schulze resigned from the company’s board in June and said he was exploring options for his ownership stake. He lost the chairmanship after a probe by a board committee found he had failed to tell the board about allegations of personal misconduct by then-CEO Brian Dunn.
A representative for Schulze declined to comment on the Bloomberg Businessweek story. A representative for Best Buy could not be reached for comment.
Best Buy shares were up 45 cents at $18.21 in early trading on the New York Stock Exchange.
Best Buy has lost business due to the tendency of consumers to use its stores as a “showroom” to try out electronic products that they then purchase for less money elsewhere, often from online retailers such as Amazon.com.
The company has been closing stores, cutting jobs and trying out a new store format to try to improve its business.

Best Buy results top estimates; outlook maintained

NEW YORK, Tue May 22, 2012 – Best Buy Co. Inc. reported better-than-expected quarterly results and maintained its outlook for the year as a turnaround plan started to take hold, sending shares in the world’s largest consumer electronics chain up more nearly 4 percent.

The stronger results eased concerns about the future of the retailer after Chief Executive Brian Dunn resigned abruptly last month amid a probe into allegations of personal misconduct.

Critics are also worried that Best Buy is serving as a showroom for Amazon.com Inc. and other online retailers.

“Best Buy is in a turnaround, and the strategic priorities we laid out at the beginning of the year are just the first phase of the changes to come,” Interim CEO Mike Mikan said. “We know we have to better adapt to the new realities of the marketplace.”

Sales rose 2.1 percent to $11.61 billion, beating the analysts’ average estimate of $11.52 billion.

Net earnings fell to $161 million, or 47 cents a share, for the quarter ended May 5, from $255 million, or 64 cents a share, a year earlier. Excluding items, it earned 72 cents a share, beating the average estimate of 59 cents.

Best Buy picks headhunter Spencer Stuart to run CEO search

NEW YORK, Mon May 21, 2012 – Best Buy Co. Inc., the world’s largest consumer electronics chain, said it has selected headhunter Spencer Stuart Inc. to conduct the search for a new chief executive.

The news came almost six weeks after Brian Dunn resigned as CEO. Following his departure, the company said an internal probe found that Dunn had an improper relationship with a female employee.

Best Buy is under pressure to find a replacement for Dunn soon. At least two brokerages have downgraded the company this month citing lack of leadership.

“Best Buy does not plan to name a replacement anytime soon, which likely means the company will not have established leadership heading into the crucial 2012 holiday selling season,” said BB&T Capital Markets analyst Anthony Chukumba, who downgraded the retailer to “hold” from “buy.”

“Without knowing who will be leading the company and what their plan will be, we think the shares will likely be at best dead money for awhile,” Chukumba said on Monday, ahead of the company’s earnings report on Tuesday.

Best Buy is in the midst of what it expects to be a six- to nine-month search for a successor to Dunn. Board member G. Mike Mikan is acting as interim CEO. The company said it will consider internal and external candidates for the job.

On Monday, Best Buy also revealed the terms of its contract with Mikan, 41, who was appointed interim CEO on April 10.