Shares of Best Buy tumbled on Monday as the consumer electronics retailer named Hubert Joly as its new CEO and president. While Joly is known as a turnaround expert, an analyst believes it could take two to three years for Best Buy to revive its business.
Best Buy's appointment of a new CEO comes one day before it is set to report second-quarter financial results. The announcement is also one day after the Minneapolis company said that its offer to advance talks with company co-founder Richard Schulze on his takeover bid was rejected.
Joly is the former head of global hospitality company Carlson, which operates Radisson hotels and T.G.I. Friday's restaurants. He is expected to take over as Best Buy's CEO in early September when his visa is secured. But investors may feel that a major overhaul of the business won't happen until next year, when Joly gets more settled.
Joly succeeds Mike Mikan, a board member who has served as interim CEO since April when former CEO Brian Dunn left Best Buy because of what the company called an improper relationship with an employee.
Daniel Binder of Jefferies & Co. said in a client note that the retailer's turnaround strategy will likely focus on building up the services business and making more cost cuts. The analyst believes such efforts could take a few years and "may be better executed as a private company."
Binder said Best Buy's offer to advance talks with Schulze on his buyout bid was likely rejected because the company tried to put conditions on the access he would be given, including a stipulation that he wait until January to take his proposal to shareholders should the board reject any definitive bid.
The analyst maintained a "Hold" rating and $21 price target.
Best Buy Co.'s stock dropped $1.41, or 6.9 percent, to $18.86 in midday trading. It is the biggest decliner on the Standard & Poor's 500 index. The shares have traded between $16.97 and $28.52 over the last year. For the year to date, the stock is down about 19 percent.
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