In an interesting development, Best Buy Co., Inc. (NYSE:BBY) Chairman and Founder, Richard Schulze, announced today that he would be resigning from the firm immediately. The founder currently has a 20.1 ownership stake in the electronics superstore, making Schulze the largest shareholder.
Originally, Richard Schulze was supposed to retire after the firm’s 2012 annual meeting on June 21st with Hatim Tyabji planned to succeed him. The plan was then to have Schulze in an honorary position of Founder and Chairman Emeritus.
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However, all of this has changed as the founder decided to simply take time and really think about what to do with his huge company stake.
Some believe that part of Schulze’s resignation is that a company probe revealed that Schulze did not properly reveal the matter to the Audit Committee when the allegations were first raised about then CEO Brian Dunn.
Best Buy has seen some not so great days recently as the current economic conditions are weighing hard on Best Buy’s bottom line. This latest blow of losing your founder and chairman will give investors only another reason to sell. Economic conditions are a little soft right now; unemployment is teetering off, along with other important factors of our economy. Not to mention, the possibly recession in Europe also has US investors shaken and uneasy.
Sales are only up 2% year over year with a huge EPS drop during the same period. These terrible growth numbers tell the story right there. Small sales increases combined with a huge EPS decrease does not spell long term success for your company. Best Buy does not have a large debt load but it is a debt load that needs to be watched and ultimately taken care of. Right now, Best Buy’s total debt to equity ratio comes in at 47.
Shares of Best Buy are down 8.50% to $18.20 on the news.
The bottom line is that Best Buy needs to get its mojo back. Tough economic conditions may linger but the board must help consumers along with price cuts and sales to help stimulate traffic and sales again. Competitor wise, Best Buy needs to strategically set its prices below those of rivals Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT). On to the shareholder front, the board needs to give investors confidence. A CEO scandal and the founder leaving combined with poor sales is not the way to give investors confidence. If the board can get its act together and really focus on a turnaround for Best Buy, it could happen.