Renewal Report

Executive Summary

Best Buy Co., Inc. (NYSE: BBY) is a retail sales company that sells consumer electronics and appliances founded in 1983. Best Buy operates globally, but generates most of its revenues in North America. Best Buy is currently in a “tune-up” stage, but must act quickly to respond to changing consumer shopping preferences and new types of competitors. By acting swiftly and following the Phoenix Effect outline for turnaround management, Best Buy may be able to remain a relevant competitor against increasing online (Amazon) and big box (Wal-Mart) competitors with lower overhead and/or

more diverse assortment. They are also not producing the returns they have in the past, nor levels of returns achieved by direct competitors like hhgregg.

Problems currently experienced by Best Buy include:

1. Analyst opinion about BBY is lukewarm, most seem to suggest mounting future problems and the past 12 month stock performance reflects this view. Recommended steps to address the current problems:

* Improve profit margin by cutting low margin products the five-year averages Net Profit Margin (Total Operations)

* has dropped to less than 2.1%

* Reduce overhead expenses in real estate, staff, and inventory

* Handle debt by negotiating more favorable terms with creditors and freezing dividend payments. Explore debt for

* equity swaps to reduce burdensome interest payments.

* Sell certain fixed assets (i.e. buildings) to eliminate depreciation costs while improving cash position.

* Reduce accounts receivable and use capital to pay off obligations

1. Current product assortment presents risk of obsolescence and margin erosion. Electronics and consumer preferences evolve rapidly as cost decreases rapidly and new technology emerges. Media content is quickly moving to online delivery, and major categories such as Blu-ray and software are in danger of becoming irrelevant. Strategies to confront these...