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Best Buy's Mikan Talks Tough Love

5/22/2012 11:52:29 AM Eastern
Minneapolis - Best Buy interim CEO Mike Mikan pulled no punches in assessing the company's status during his first earnings call with investors this morning.

In an opening statement, Mikan acknowledged that Best Buy was caught "flat-footed" by a rapidly evolving marketplace and that its stores no longer "wow" customers or provide a unique shopping experience.

"Right now we're not even close to good enough," he said.

But marketplace disruptions create new opportunities, he noted, and promised to unveil a long-term strategic "blueprint" this summer that will return Best Buy to its leadership role. The company is already in turnaround as it continues cutting costs and right-sizing the business, he said, but it must also improve training, employ analytic tools to leverage its vast database, reduce store size (but not store count), and bolster its e- and m-commerce operations.

Mikan said e-commerce is rapidly outstripping conventional shopping, and is creating an economy "without boundaries" as consumers demand virtual products and services as much as hardware.

To address the change, Best Buy is building a first-class team to create a world-class e-commerce capability, and plans to tap the full potential of mobile devices, he said.

Despite numerous advantages, including deep vendor relationships and the No. 1 position in key CE categories, "We need to acknowledge the truth," Mikan told analysts. "We need to change substantially" to become more nimble, intelligent and relevant, and he promised "tough decisions" and "bold actions" in which no sacred cows would be spared.

During the first-quarter conference call, Mikan, a four-year board director, deflected a question from an analyst asking why it took the unseating of chairman Dick Schulze and the resignation of CEO Brian Dunn to step up the strategic overhaul.

Also during the call, U.S. operations president Mike Vitelli observed that an increasing number of TV vendors are employing uniform pricing policies (UPP) in order to realize a better return on investment for their products. So far the TV outlook for Best Buy, and the industry, remains essentially unchanged from last year, he said, with unit volume growing and average selling prices (ASPs) falling modestly. The forecast could change, he added, once the recently introduced 2012 product lines have a chance to fully enter the marketplace.

Separately, Best Buy confirmed that U.S. chief financial officer Ryan Robinson is leaving the company on Friday. His departure, for the CFO post at a chain of urgent care centers, follows this month's resignation of international CFO Dave Deno, who assumed the same position at national restaurant chain operator OSI.

Their exits bring to five the number of senior execs that have left the company over the last 10 weeks, including chief technology officer Robert Stephens and chief marketing officer Barry Judge, as well as Dunn.
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