3 Companies Returning to Their Roots

Sometimes the best things in life are those that we know. Especially in turbulent times, people have a tendency to cling to the things they know best. It shouldn't be a surprise that companies do the exact same thing, returning to what worked in the past when new ideas flounder. Over the past month, Barnes & Noble (NYSE: BKS  ) , Best Buy (NYSE: BBY  ) , and now J.C. Penney (NYSE: JCP  ) have all turned to leaders from their pasts.

Depending on the company, the "new" blood is either someone who was instrumental in changing the face of things, founded the place, or both. Should investors welcome these prodigal sons back with open arms, or does it mean only heartache in the future?

Barnes & Noble's CEO moves to buyout
In February, Barnes & Noble announced that founder and chairman Leo Riggio had expressed interest in purchasing the company -- but just the retail portion. In effect, the sale would split the retail and Nook divisions, which is a move that has been in the works for more than a year now. Over the course of that year, the Nook has floundered, with holiday sales falling 13% last year.

But the company also got a buy-in from Microsoft and Pearson for the Nook last year, and under the last announced purchase from Pearson, the Nook business is valued at more than Barnes & Noble in its entirety. Investors have been pushing for the division of the two businesses, which seem to be dragging each other down, and since the announcement of Riggio's intentions, the company's stock has risen 24%.

Riggio would likely pare down the overall store count, focusing on the businesses that are generating the most revenue. There is also the chance that Barnes & Noble could attempt a smaller-format store, much like Best Buy has done with its Best Buy Mobile locations. Overall, Riggio's return to ownership seems like a good thing for both customers and investors.

Best Buy in the trenches
Best Buy has also been on the ropes for failing to adapt to a changing business model. Earlier this year, founder Richard Schulze announced that he was raising capital to buy out the company and take it private. After the deadline for his bid came and went, Best Buy announced late last month that Schulze would be rejoining the board, and that he was bringing former CEO Brad Anderson with him.

The move ended up being one of the best outcomes the company could have managed. The founder is back in the mix -- with the blessing of investors and board members -- and the CEO who helped make Best Buy the titan that it was in the mid-2000s is also around to help out. But Best Buy employees and customers don't have the headache of confusion that comes from new leaders and the big changes they bring. Instead it's just a return to stability.

As Best Buy focuses on computers and mobile devices -- which had a 13% increase in comparable sales last quarter -- the company should finally move into the new sales model. The presence of Schulze and Anderson will help that transition happen smoothly and effectively.

J.C. Penney brings up the rear
If only it were that pleasant at J.C. Penney. Unfortunately, the return of Mike Ullman to the CEO position is less a move to increase stability and more an attempt to regain some of the glory lost under Ron Johnson's watch. With comparable sales down over 30% in-store and online last quarter, J.C. Penney is in a rough spot, and a return to Ullman may not be enough to change that.

The last year and a half has seen the end of sales and coupons, the return of sales and coupons, and the introduction of shops-within-a-store. While some of those shops have been successful, it seems likely that Ullman will ultimately phase them out, adding even more turbulence to the J.C. Penney business.

Of the three companies returning to their roots, I have the most hope for Barnes & Noble, which should be able to free itself from its Nook obsession if Riggio has his way. J.C. Penney is clearly in the worst position, and even a turnaround might not save the brand now. Sometimes, you just can't get things back to how they used to be.

Is Best Buy a good buy again?
The brick-and-mortar versus e-commerce battle wages on, with Best Buy caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer. To help answer them, The Motley Fool has released a premium research report detailing the opportunities -- and the risks -- in store for Best Buy. Simply click here now to claim your comprehensive report today.


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