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UPDATE: New Best Buy CFO Confident on Turnaround Despite Difficulties

Date : 11/13/2012 @ 2:33AM
Source : Dow Jones News
Stock : Williams-Sonoma Common Stock (DE) (WSM)
Quote : 74.3  1.71 (2.36%) @ 5:30AM
Williams Sonoma share price Chart

UPDATE: New Best Buy CFO Confident on Turnaround Despite Difficulties

Best Buy (NYSE:BBY)
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2 Years : From Aug 2012 to Aug 2014

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--Sharon McCollam comes out of retirement to take top financial spot

--Her experience in e-commerce, shrinking retail footprint important for company

--Shares rise on news, which analysts characterize as Buy Buy victory

(Updates with further comments from CFO, analysts and search-firm executive starting in the 10th paragraph)

 
   By Joan E. Solsman 
 

Best Buy Co.'s (BBY) new chief financial officer, Sharon McCollam, has no illusions about the struggling retailer's challenges in e-commerce or any doubts it can overcome them.

The 12-year veteran of upscale home-furnishings retailer Williams-Sonoma Inc. (WSM), who retired in March, told Dow Jones Newswires Monday that she came back to the executive suite to be a part of what will be "one of the most exciting and important retail transformations of the decade."

Ms. McCollam is the most high-profile appointment at the company under new Chief Executive Hubert Joly, a turnaround specialist hired earlier this year to revive its long-slipping sales. Best Buy and its big-box model have struggled to keep pace with a market that has transitioned rapidly to online selling.

But she said the successful retailer in this new iteration of the consumer-electronics market must be a marriage of "bricks and clicks."

Shares in the world's largest consumer-electronics retailer were up 4.3% at $15.96 in recent trading Monday on the news of her appointment, which is effective Dec. 10.

Ms. McCollam is well-regarded for her success at Williams-Sonoma. In notes to clients, BB&T Capital Markets analyst Anthony Chukumba called her appointment "a major coup," while Janney Capital Markets analyst David Strasser said it was a "big win."

She brings Best Buy extensive experience in online retailing from Williams-Sonoma, which last fiscal year derived 38% of its revenue from e-commerce. She also helped usher that company through a period of store rationalization, as it shrunk its base after overexpanding before the recession.

Ms. McCollam conceded Best Buy has been slow to capture its share of the online market. The company, the world's 11th largest online retailer, "should be much bigger than that," she said.

However, her experience from Williams-Sonoma is with merchandise that is often unique or exclusive, while Best Buy's is commoditized and easy to comparison shop online. It is an environment that has fostered "showrooming," the practice of examining a product in a store only to buy it elsewhere online for less.

Ms. McCollam said Best Buy has a price-perception problem rather than realistic price disadvantage. She noted that about 15% of people who visit the company's stores have an intent to buy online, which represents traffic Best Buy has the opportunity to convert.

Among her ideas to improve Best Buy's standing are to take advantage consumer electronics' highly fragmented market and to leverage its large customer-help capacity.

The challenge for Best Buy, however, is providing a level of product expertise similar to that of an Apple Inc. (AAPL) store but for a vast assortment. Ms. McCollam said she believes investments in employee training will make Best Buy "a rival to even the best."

"We really are the first place you can go to get any consumer electronics product that you need and get advice on it," she said. "We will be more successful because there's nothing out there like this."

Last month, the company announced Jim Muehlbauer would be leaving the company, one of several major management changes recently as Mr. Joly shows his interest in shaking up Best Buy's status quo.

Best Buy hired executive search firm CTPartners to lead its CFO hunt. In an interview, CTPartners Vice Chairman Umesh Ramakrishnan said Ms. McCollam quickly rose to the top of a wish list for the spot, which he described as "a very, very small list of candidates that can be or should be CFO and CAO" given Best Buy's large size and special needs.

Wall Street applauded the move. BB&T Capital's analyst Mr. Chukumba noted her "tireless work ethic, unparalleled operational and financial acumen and encyclopedic industry knowledge." However, he added the hiring doesn't necessarily mean a leveraged buyout is less likely.

Company founder Richard Schulze is marshalling financial support for his bid to take Best Buy private. It's a prospect that analysts say is unlikely but nonetheless less difficult to achieve following a recent deterioration in share value.

However, Janney's Mr. Strasser said Ms. McCollam's appointment "could serve as a pretty aggressive counter to any bid for the company."

--Maxwell Murphy contributed to this article.

Write to Joan E. Solsman at joan.solsman@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires




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