In case you missed the news over the weekend -- and Best Buy (NYSE: BBY ) is certainly hoping that you did, given the nature of pushing out a regulatory filing on Friday after the market close -- its new CEO is already dumping shares.
Hubert Joly sold nearly $1.2 million worth of Best Buy stock on Wednesday. The filing claims that the shares were "automatically withheld upon vesting of shares to satisfy tax withholding obligation." A Best Buy statement on Friday night also confirmed that the transaction was done solely to cover the tax hit associated with stock grants.
"These sales are commonplace and done at predetermined dates," the statement reads.
It still looks bad. It's just a reminder of how stupid it was for Best Buy to take on a new CEO -- a foreign CEO for which there were even penalty contingencies coming out of the retailer's pockets if Joly couldn't secure the appropriate work visas -- at a time when founder Richard Schulze was trying to orchestrate a buyout.
Joly's excessive pay package and Best Buy's horrendous quarterly report filed the following day point to the board's ineptitude in positioning the company for a buyout that would maximize shareholder value.
Even if investors aren't incensed at the transaction that saw Joly unload a sliver of his freshly acquired effective stake in Best Buy at a mere average price of $18.02 last week -- when Schulze was offering an exit strategy for the entire company in the mid-$20s earlier this summer -- they should still be worried.
Best Buy's model may be irreparable. Even if it emphasizes big-ticket appliances along the lines of hhgregg (NYSE: HGG ) or furniture along the lines of and Conn's (Nasdaq: CONN ) , we're still talking about a chain that will have too many stores given the infrequent nature of repeat visits for non-media items. The push to open a chain of smaller mobile stores in strip malls sounds great on paper, but it's been a disaster for RadioShack (NYSE: RSH ) . Even pushing toward trade-ins and pre-owned resale merchandise doesn't seem like much of a strategy now that pioneer GameStop (NYSE: GME ) is suffering double-digit declines there.
Automatic? Commonplace? Predetermined? It doesn't matter. Best Buy clearly is overpaying its new CEO -- perhaps its final CEO -- if a seven-figure sale is necessary just to satisfy a tax bite.
Best Buy is not a good buy
I entered a bearish CAPScall on Best Buy in Motley Fool CAPS last year. The call is beating the market so far -- because Best Buy is not. It's a gutsy call now, but I'll stick with it on paper. I wouldn't short Best Buy with real money.
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