November 24, 2012

Old pilot aims to right Best Buy boat

The company's founder took a failing chain to a dominant position and he thinks he can do it again.

By THOMAS LEE, DAVID SHAFFER and PAUL MCENROE Star Tribune

(Continued from page 3)

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A shopper looks at televisions at a Best Buy store in Franklin, Tenn., after the store opened at midnight, kicking off Black Friday. Former executives are attempting to buy the troubled chain to take it private.

The Associated Press

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Children take a break Thursday from waiting in line at Best Buy in Carbondale, Ill. Richard Schulze, a former executive, is expected to offer as much as $8 billion to buy the company. His message is simple: His team created Best Buy – and only they can save it.

The Associated Press

Wurtzel, the former Circuit City chairman, said his company failed because the retailer wanted to please Wall Street rather than spend the money to upgrade stores and catch up with Best Buy. For example, Circuit City decided to spend nearly $1 billion to repurchase stock just as the economy faltered. By the time the Great Recession struck in 2008, the retailer ran out of money and could not pay its vendors.

"The cupboard was bare," Wurtzel said.

Circuit City's demise may have only reinforced Best Buy's belief in the superiority of its big box stores. Why alter a seemingly successful business model?

"Circuit City's bankruptcy may have been the worst thing to ever happen to us. You always need an enemy," said Willett, the former international chief who spoke to the Star Tribune just before Schulze revealed his plans to buy the company. "Competition is always healthy. Consumers always need choice."

Schulze, who now mostly resides in Florida, is moving closer to making an offer to purchase Best Buy, sources say. If he succeeds, he will make it a privately held company, out of reach of the pressure of investors and shareholders.

Wurtzel thinks Schulze has the right idea. The former Circuit City CEO said he wished Circuit City had gone private when it had the chance. That way, the retailer could have focused on retooling the business rather than pleasing Wall Street.

"Best Buy is more likely to survive as a privately run business," Wurtzel said. "It's difficult to make these massive changes as a public company."

Either way, Best Buy needs to reclaim the sense of urgency that was so instrumental to its past success, Lenzmeier said.

"We were speedy, quick and could maneuver around everyone. The others were the big tankers. Now we've become the tanker.""

 

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