Shares of Best Buy Co. Inc. (NYSE: BBY) rose as much as 4% after an announcement that Sharon McCollam, who used to be the director, executive vice president, chief operating and chief financial officer of Williams-Sonoma Inc (NYSE: WSM), would become the crippled retailer’s chief administrative and chief financial officer. McCollam obviously will not be Best Buy’s chief executive officer or its chief merchandising or marketing officer. That means her role in turning around the company will be limited. So, why did Best Buy’s stock rise?
Best Buy could be sold soon to founder Richard Schulze. Best Buy might benefit from having a veteran CFO on its side of the table for negotiations. But investment banks are supposed to be better at this than CFOs are, and Best Buy very likely has an army of bankers.
Best Buy has two critical problems, as far as most outsiders, and probably insiders, are concerned. One is that Amazon.com Inc. (NASDAQ: AMZN) takes a large share of the consumer electronics business, even though it does not have the cost of stores. The other is that Best Buy almost certainly has too many locations. Its flattened revenue supports the argument that the least efficient stores are a drag on its margins. Store closings would make Best Buy smaller, but should increase profits considerably. It does not take a new CFO, no matter how skilled, to figure either of those things out. And it is beyond McCollam’s mandate as CFO to address them — unless CEO Hubert Joly has no power at all.
Public relations executives usually bend the rules of what is reasonable to say about the future effects of their new executives. The press announcement of the McCollam appointment includes this note:
As the Chief Administrative and Chief Financial Officer, McCollam will influence and shape all aspects of Best Buy’s operations and transformation strategy. In addition to her proven financial leadership, McCollam also brings broad retail and multi-channel operational expertise that will be highly relevant to Best Buy’s transformation.
If that transformation is not well underway, and if it has not shown some initial success, Best Buy’s situation worsens by the hour. A new CFO will not help that.
Douglas A. McIntyre