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Best Buy Is Back!

Originally published in the StarTribune.  

What a difference a year makes!

A year ago Best Buy was headed for the unending troubles that have beset retailers like Sears, Kmart, Circuit City, J.C. Penney and Mervyn’s: storied histories followed by long-term decline of their brands.

Last April CEO Brian Dunn resigned over allegations about a relationship with an employee. However, Best Buy’s problems went beyond Dunn’s conduct. Its same-store sales were declining and its stock price had dropped from $45 to $25. Security analysts were predicting Best Buy’s ultimate demise, referring to it as “Amazon’s showroom.”

How did Best Buy get back on track while overcoming a rupture with founder Richard Schulze? Let’s look beyond the headlines at the leaders involved.

Dunn’s resignation was just the beginning of Best Buy’s troubles. In May, Schulze stepped aside as chair for failing to disclose allegations about Dunn, and later resigned from the board, threatening to take Best Buy private. Meanwhile, interim CEO Mike Mikan was preparing a plan to preserve Best Buy by closing stores and cutting costs. This upset Schulze as he feared “his baby” would be dismantled.

Schulze countered in August with a preliminary offer of $26-$28 per share to take Best Buy private and bring in his own management team led by former Best Buy CEO Brad Anderson. Wall Street seemed skeptical whether he could raise $8 billion to $9 billion for the buyout. Meanwhile, Best Buy’s 170,000 employees, customers and shareholders wondered whether the retailer had a future.

Things changed dramatically in September when Carlson CEO Hubert Joly was elected CEO. Joly left the CEO post of Carlson to take on dual uncertainties of Best Buy’s ownership battle and unclear strategy. A brilliant strategist and astute observer, Joly recognized that Schulze would be his No. 1 shareholder whether BBY was public or private. He reached out to Schulze to engage in discussions, only to be rebuffed at first.

Joly recognized Best Buy couldn’t just cut costs or return to its past. Online retailing was here to stay and Amazon’s threat couldn’t be ignored. More important, Best Buy’s employees, customers and shareholders needed light at the end of the tunnel.

With Christmas approaching, Joly announced his “Renew Blue” strategy: a balance between retail and online strategies and in-store matching of online prices. His ace in the hole Amazon couldn’t match: the Geek Squad to help customers set up their home electronics. Joly also reshaped his leadership team to fit the new strategy, replacing Dunn’s team with Shawn Score to lead retail, Scott Druckslag to spearhead online, and Sharon McCollam as CFO.

Best Buy’s shares continued to fall to a December low of $11.29, as investors didn’t believe Schulze could make a fully financed offer, nor did they think Joly could turn around Best Buy. In late December, Schulze and the Best Buy board agreed to extend his deadline for two months. Meanwhile, Joly continued to reach out to Schulze.

In January, Joly announced good news: Retail sales didn’t decline during Christmas as expected, and online sales climbed 10 percent. The bleeding was stanched, and the turnaround underway.

Meanwhile, discussions between Schulze and Best Buy continued, leading to the agreement announced March 25: Schulze became chairman emeritus as Anderson and former COO Alan Lenzmeier rejoined the board, representing Schulze’s 21 percent stake. Joly’s role as CEO was cemented. To reinforce Schulze’s newfound confidence, Joly on April 5 announced a strategic partnership with Samsung to install boutiques in Best Buy stores, giving Samsung a showroom to compete with Apple stores.

While Best Buy still has a long way to go, the road ahead is now clearer. From their December low, Best Buy shares have more than doubled to $26, so Joly can focus all of his energies on making this turnaround successful.

This outcome is far better than most anticipated. Credit Schulze for his deep commitment to Best Buy, rising above wounded pride, while letting Joly run the company. Also credit Anderson’s role as honest broker, and Best Buy’s board for hiring Joly and working toward equitable solutions. The real hero here is Joly, who recognized what was needed to turn the business around and find a way to reach an accommodation with the founder — certainly not easy tasks.

In the end there are no losers here, only winners. Enlightened leadership is transforming a great retailer and preserving this bedrock of the Twin Cities. Other companies threatened by rapid shifts to online and mobile would be well advised to learn from Best Buy’s experience.

Amtrak ridership hits record levels

Amtrak is having a good year so far.

March set a record as the single best month ever in Amtrak’s  history. October, December and January set individual monthly records, the railroad said Tuesday.

Overall ridership grew about 1 percent in the first half of 2013, despite Superstorm Sandy and other severe weather events.

Rebounding strongly from such service disruptions, Amtrak ridership grew nearly 1 percent in the first six months of 2013-2014, compared to the same period the prior year. In all, 26 of its 45 routes posted ridership increases. Amtrak expects to end the fiscal year at or above last year’s record of 31.2 million passengers.

“The continued ridership growth on routes across the country reinforces the need for dedicated, multi-year federal operating and capital funding to support existing intercity passenger rail services and the development of new ones,” said Amtrak President and CEO Joe Boardman.

Routes with ridership growth in the October-to-March period …

Were you in foreclosure in 2009 or 2010? A settlement check could be in the mail

Were you in foreclosure in 2009 or 2010?

If so, a check could be in the mail for you, under a settlement reached between top banks and U.S. regulators earlier this year.

The $3.6 billion cash settlement is to compensate 4.2 million borrowers who were wrongfully foreclosed on. The payments will be split among borrowers who were in foreclosure in 2009 or 2010 and had home loans serviced by one of 13 banks, including Bank of America, JPMorgan and Wells Fargo.

Cash payouts will range from between $300 and $125,000, according to regulators. Payments will begin going out on Friday, the Federal Reserve announced on Tuesday.

The cash payments are supposed to go to borrowers who were at any stage of the foreclosure process during the height of the housing crisis.

The largest numbers of borrowers will receive between $300 and $600. Borrowers who were foreclosed on while they were on active duty in the military would receive the top amount –  $125,000 each. About 50 borrowers who were …

April 9, 2013 Edition 15

How Old Are You? By Zig Ziglar You probably know some people in their forties who are “old,” and others who are in their seventies and yet are “young.”  I say that because I believe most of the readers of this column have confidence in Webster’s Dictionary.  Not once does Webster refer to the calendar [...]

Many have given up looking for work

Follow us on Twitter @AJCBiz

Many more people stopped looking for work last month than in February, a revelation that cast a pall over a recent string of month-to-month employment gains nationally and locally.

The question on the minds of many is whether this is just a blip or sign of something more disturbing for the months ahead.

People who are out of work are no longer counted as unemployed once they stop looking for a job, a major reason why the national unemployment rate dropped to 7.6 percent in March, the lowest in four years, from 7.7 percent a month earlier, according to the U.S. Department of Labor. The unemployment rate for metro Atlanta is 8.3 percent.

Only 63 percent of Americans were working or looking for work last month, the lowest participation level in nearly 34 years. Economists say many of those who had been job hunting became so discouraged that they gave up the search. Others may have stopped looking because unemployment benefits had run out. The …

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