UPDATE 4-Best Buy CEO out as shoppers move online

Tue Apr 10, 2012 11:52am EDT

* CEO Brian Dunn resigns

* Director Mike Mikan to serve as interim CEO

* Company has been losing shoppers to Amazon and discounters

* Shares fall 2.2 pct

By Dhanya Skariachan

April 10 (Reuters) - Best Buy Co Chief Executive Brian Dunn has left the world's largest consumer electronics chain, which has struggled against stepped-up competition from internet retailers and discounters.

Under Dunn's tenure, which lasted less than three years, critics have complained that Best Buy became a showroom for Amazon.com and other Internet retailers, with consumers going to Best Buy stores to sample electronics like high-definition televisions, but then buying them elsewhere at lower prices.

The company, seen as a bellwether in the consumer electronics industry, reported declines in same-store sales in six of the past seven quarters, including during the 2010 holiday season, when it made a bad bet on technology like 3D television that consumers did not embrace.

Despite offering bigger discounts and free shipping to lure shoppers in the 2011 holiday season, same-store sales fell 2.4 percent in the latest quarter, including a 2.2 percent decline at U.S. stores open at least 14 months.

"I hate to be rude, but I think he (Dunn) was doing a terrible job. T his is a company that had a sales guy in charge, and I just don't think they are well positioned to deal with the onslaught from the Internet," said Michael Pachter, analyst at Wedbush Securities.

"They have a big disadvantage to the Internet retailers because they have a big cost structure. So they need a guy who can fix that rather than trying to sell more stuff."

Shares of Best Buy were down 2.2 percent to $22.16 in late morning trading on Tuesday, having fallen earlier in the session to $21.62, their lowest since December 2008.

The stock is down more than 32 percent since Dunn became CEO, compared with a 52.7 percent increase in the Standard & Poor's 500 index.

In March, Best Buy announced plans to close 50 of its 1,100 big box stores and cut 400 corporate and support jobs, moves critics said were a step in the right direction but not strong enough.

"It's been on his watch that the company has been late to address all industry upheavals, it's been late in closing stores, and most importantly I think they've tossed money down the drain repurchasing shares under his watch too, cash that could have been stored on the balance sheet to address the future of increased online consumption of electronics," said Brian Sozzi, chief equities analyst at NBG Productions.

The next chief executive will need to have experience in ecommerce or at least an understanding of how fast the retail market is changing for electronics, and also be able to make big cuts to Best Buy's cost structure, analysts said.

"He would have been a great CEO for Best Buy ten years ago when they were in just growth mode, when they didn't have the Amazon threat, when we had a reasonably good product cycle, and we didn't have Apple becoming a larger and larger supplier to the consumer electronics industry," BB&T Capital Markets analyst Anthony Chukumba said of Dunn.

Dunn started at Best Buy as a sales associate in 1985 and rose through the ranks to become CEO in June 2009.

Best Buy said director Mike Mikan will serve as interim CEO while it looks for a permanent replacement for Dunn. Mikan, who will remain on the board while serving as interim CEO, has been a Best Buy director since April 2008. He formerly served as executive vice president and chief financial officer of UnitedHealth Group Inc.

"There was mutual agreement that it was time for new leadership to address the challenges that face the company," Best Buy said in a statement on Dunn's departure.

Richard Schulze, the founder of Best Buy, continues to serve as chairman, the company said.

Best Buy is not the only victim of changes in the consumer electronics market. Circuit City was forced out of business in 2009 amid stepped up competition from Wal-Mart Stores Inc and other retailers, a move that for a time gave Best Buy a sales boost.

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