Here are the 4 Potential Drastic Measures on Tap at Best Buy
An out of the blue, and likely hurried, announcement of a permanent CEO at Best Buy has now been announced. I am telling clients (www.decodingwallst.com) to think like the market today, specifically with regards to a Best Buy restructuring plan that may not be announced until the holiday quarter results are reported (was supposed to be announced on August 21 with the latest earnings report). Here are a couple drastic actions that may emerge from the final Best Buy restructuring plan:
•Dividend is cut/halted. Best Buy has the balance sheet to continue to pay the dividend. But, management could take a proactive approach in order to plow annual savings into closing additional stores, re-training employees, and dropping merchandise prices. JC Penney's (JCP) dividend suspension was a reactionary maneuver, for purposes of comparison.
•Share repurchases stopped. One could only hope this is true, it should have happened many, many quarters ago.
•More than the currently guided for 50 U.S. big box stores are shuttered, which would be a good action in my view. However, the market may take it as (1) a greater number of stores in the fleet being hurt by competitive forces and poor customer service; and (2) risk that worse employee morale carries over from the holiday season of 2012.
•China expansion plan through the Five Star brand is reigned in until Best Buy corrects U.S. operating issues. Ditto the aggressive Best Buy Mobile store expansion plan, these stores are no more than edited RadioShacks situated in urban areas (focus on mobile phones, which is a low margin category…the trick is to sell the services).