By now, even the ones who don’t buy into Best Buy CEO Hubert Joly’s track record should have.
He took Best Buy on over two years ago and did more to restore the electronics retailer’s prominence in the market than his predecessors. Even so, Joly’s transformation hasn’t come without its blemishes.
Amid a meandering stock price and deep industry worries, Joly has assembled a team of top consultants to scrutinize the retailer. The brain trust, which includes the likes of ex-Time Warner chief Richard Parsons and former Motorola executive Danny Shader, is expected to begin making its recommendations later this month.
“I’ve spent the last seven months in the process of looking very carefully at everyone,” Joly told Crain’s Chicago Business. “I’ve spent the last three months working very closely with the experts we have hired. I have a team of bankers, consultants and lawyers, and they’ve been the best resources we have.”
Joly called this his “most elaborate” job at Best Buy. But people who have known the Joly for years say that his struggles to balance corporate experience with an intimate understanding of the company’s operations are not new. And it’s worth nothing that Joly leaves behind a complex game plan based on his own track record.
Asked if that meant investors should set expectations lower, Joly told Crain’s: “Fair enough.”
The problem for Joly is that even a track record as impressive as Best Buy’s turnaround performance is far from unparalleled.
The former finance executive from Ikea has done work with the likes of Deutsche Telekom, Siemens and Unilever. But his retail experience, and time spent at Gap, Gap Europe and Home Depot, have so far lacked any skill sets that match Best Buy’s competitors.
And Joly is facing a retail environment that’s far less forgiving than Best Buy’s late-1990s heyday, when stores only counted on one part of the retail cycle — new product launches like music players and software.
Now, major retailers face challenges from changing consumer behavior as well as the intense competition from Amazon, eBay and Wal-Mart, which began turning the market into a virtual arms race.
Joly told Crain’s that his recommendations include price matching with other retailers, expanded use of stores on express shipping dates, stocking its warehouses with new inventory, and “healthy online experiences.”
“Customer service is core to the recovery,” he said. “We have to address customer-first, which is how we approach the store, and that means focusing on the individual experiences, from the first thing you get to the next.”
Joly managed to reduce Best Buy’s losses from a decade-high $3.7 billion in 2012 to $1.5 billion last year.
The company’s stock is about half what it was a decade ago. Even so, some argue that under Joly’s watch, Best Buy has done better than its rivals.
Last year’s operating income was greater than that of “mainstream” players like Home Depot, Lowe’s and Target, according to data from Consumer Edge Research. It wasn’t able to beat out electronics biggies like Amazon, but shoppers have shown that they prefer the old Best Buy.
Traditional stores have remained steady, while many tech giants have either slashed their square footage or closed most of their stores.
And then there’s the case of e-commerce. Joly told Crain’s that Best Buy would open nearly 700 stores over the next five years, even as Amazon has built tens of thousands of sales pages to capture online shoppers. Joly has made it clear that Amazon’s growth has proven that any retailer with a solid physical presence can survive.
Best Buy, which still doesn’t generate a profit, has long relied on its huge presence in the U.S. for success. Its stores are so powerful, in fact, that it has been able to win what amounts to a tax on online sales. Those sales taxes have been a major reason that Best Buy enjoyed a rebound in sales in 2015.
Best Buy acknowledged its recent revenue shortfall in its latest financial results.
But now, it will have to convince investors that the company’s best days are still ahead of it.
– Written by Darya Korsunskaya
© 2020 CNN. All Rights Reserved