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Best Buy Revamps Management Structure

25 Oct, 2012 By: Erik Gruenwedel

President and EVP of U.S. operations departing CE chain

Best Buy Co. late Oct. 24 said it is changing its senior management structure — a reorganization that will see Mike Vitelli and Tim Sheehan, president and EVP of U.S. operations, respectively, leave the consumer electronics chain.

Minneapolis, Minn.-based Best Buy is curtailing operating costs and downsizing its retail footprint as part of restructuring new CEO Hubert Joly believes will help the chain better adapt to evolving ecommerce competition and changing consumer demands.

Effective January 1, 2013, Best Buy's operations in the U.S. will be structured around two channels — online and retail — with ecommerce continuing to be led by Stephen Gillett, president of digital and marketing. Shawn Score will lead the domestic retail channel a position previously led in part by Vitelli and Sheehan.

In addition, Best Buy is creating three business groups — connectivity, home and services — with Jude Buckley heading the connectivity business group, succeeding Score. Home and services groups will continue to be led respectively by Mike Mohan and George Sherman.

Vitelli will retire from Best Buy at the end of the fiscal year, working with Joly to facilitate a smooth transition. Sheehan is leaving the company at the end of the month.

“One thing I have learned in helping turn companies around is that a business needs to have a nimble organization,” Joly said in a statement. “Our new organization will help build a closer connection to our customers and front line employees, as well as accelerate our transformation.”

Best Buy gave an update on projected third-quarter results (ending Nov. 3) saying comparable store sales are expected to decline at a rate consistent with the first two quarters, including drops of 5.3% in Q1 and 3.2% in Q2, respectively. Gross profit is expected to decline as well.

Best Buy, which earlier this month said it would match key retail competitors on select items, will hold an analyst and investor day Nov. 1, in New York to discuss the changes in more detail. The CE chain releases quarterly results Nov. 20.

Michael Pachter, analyst with Wedbush Securities in Los Angeles, continues to question Best Buy’s turnaround strategy, in addition to the leadership of Joly, whom Pachter says lacks the retail experience to guide Best Buy.

"We believe that Best Buy’s store level economics place it at a 10% price disadvantage to online retailers, and we believe that increasingly sophisticated consumers with mobile Internet access will value lower prices over service, ultimately making Best Buy’s big boxes obsolete,” Pachter wrote in a Nov. 24 blog.

About the Author: Erik Gruenwedel

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