“You guys try to reassure investors by saying that e-commerce is not the destiny of bricks and mortar, but if you look at data from Mastercard and others, it’s clear that our customers are driving purchases that we’re selling on a digital platform from Amazon or an Apple store,” Joly said in an interview on Bloomberg TV. “This is not an argument about whether or not brick and mortar is needed, it’s about how customers are shopping these days.”
Hubert Joly was the CEO who turned around a public-relations disaster at Best Buy. Now he wants to do the same for capitalism.
Mr. Joly is trying to stop a string of departures at the Massachusetts-based electronics chain. The chain is struggling in an increasingly digital age, where the lines between online and brick-and-mortar stores are blurred. The U.S. retail industry’s growth has slowed to a crawl, as shoppers shift to buying more online. Best Buy’s sales growth has been far behind its competitors, and sales have been falling for more than a year.
“It has an unsustainable mode of growth that’s going to lead to more retail bankruptcies,” said Jonathan Hoenig, a money manager with Capital Group Cos. who says the stock could drop to $10 a share, down from around $35 now.
Mr. Joly, the former head of U.S. giant Air Canada, spent more than a year trying to turn around Best Buy’s public image. Customers have complained about how they’re greeted at store counters and their clothing being checked on mobile devices, not by employee in store. Amazon’s “showrooming” – using a store as a showroom before buying cheaper items online – also chipped away at stores’ profit margins.
“It’s the over-amplification of the issue,” said Mr. Joly. Best Buy’s employees are “straightforward and willing to work.” They take home the same pay they did a decade ago, he said.
Mr. Joly had a falling out with the company’s biggest shareholder, founder Richard Schulze, in June 2015. When Mr. Schulze, who’d built the chain into the nation’s largest electronics retailer, stepped down as CEO, he had less than $1.5 billion in Best Buy stock and options, making him the chain’s third-richest man, according to Bloomberg Billionaires Index. He’d built a fortune.
“My view is that if this CEO had been a great CEO, he would have been in line for a management buyout,” said Jim Hedlund, a portfolio manager at Oaktree Capital Group.
Mr. Joly says he learned important lessons while buying back debt. He called it “an opportunity to change the way the debt market works.”
It was a mixed message. Under Mr. Joly, Best Buy launched a record $2.4 billion bond offering this month. Mr. Schulze has denied any claim that he put pressure on the company for that deal.
Mr. Joly now says the new structure may lead to better credit terms for smaller companies that’s been hard for mom-and-pop firms. “You’ve seen the impact of that with Valmont Industries, when they came back,” he said, referring to the New York maker of hand tools. “Under us, that would have taken longer.”