Investors have plenty of reasons to want disoriented Best Buy (NYSE: BBY) CEO Brian J. Dunn to be dismissed. Dunn has lost his way as he tries to find a path to compete online with firms like Amazon.com (NASDAQ: AMZN). Another reason is a string of disappointing earnings, which was added to recently as the company posted a $1.7 billion loss in its fourth quarter. Yet another is his decision to shut only 50 stores — a tiny number for a retailer with 180,000 employees. His comment about the changes was:
In order to help make technology work for every one of our customers and transform our business as the consumer electronics industry continues to evolve, we are taking major actions to improve our operating performance.
The actual transformation barely exists, based on the articulation of his plans.
The suffering of shareholders is particularly acute for those who have watched the stock drop more than 50% during the past five years.
Now, Best Buy has come closer to a major ratings cut by Standard & Poor’s. In a note about the retailer, the ratings agency reacted to Dunn’s plans:
In our view, these actions underscore that its current business model is not working and that the steps taken to date have not been enough to improve performance.
Standard & Poor’s Ratings Services placed its “BBB-” corporate credit rating and other ratings on Richfield, Minn.-based Best Buy Co. Inc. on CreditWatch with negative implications.
In other words, Best Buy’s debt has come to the edge of being cut to “junk.”
Best Buy’s problems also can be placed at the feet of founder Richard M. Schulze. He is the firm’s current chairman and a huge stockholder. Dunn likely would not continue to serve without Schulze’s approval.
Best Buy represents the worst of American big business. It has a CEO who has failed as a leader. The company’s board has failed to replace him. In the meantime, shareholders stand by helpless as Best Buy continues to self-destruct.
Douglas A. McIntyre