Best Buy (NYSE:BBY) CEO Hubert Joly has done a fairly impressive job in pulling his brand back from the brink. He has stemmed the losses, improved the company's reputation, and given shoppers a reason to believe the chain has a chance to be around for the long haul.
Part of Joly's "Renew Blue" turnaround strategy has been built around improving the customer experience, and this is where John Legere, the CEO of Best Buy partner T-Mobile (NASDAQ:TMUS) thinks Best Buy has failed.
Forget that because Best Buy sells T-Mobile phones, Legere should probably have just picked up the phone and called Joly. Sharing his thoughts on Twitter is simply how Legere operates and there is no reason to expect him to be any more discreet when pointing out the failings of a company his brand does business with. In this case, he's uncovering -- and throwing out for the world to see -- the idea that despite "Renew Blue," Best Buy has the same lousy service and disengaged workers it did before Joly.
If that's true and Joly can't fix it, then the company is likely to join Circuit City in the graveyard of failed electronics box stores.
Why do Legere's remarks cut so deeply?
One of the key parts of Joly's "Renew Blue" turnaround plan is leveraging excellent customer service and attracting quality Best Buy employees who enhance the customer experience. He explained it in a 2012 press release outlining his plans:
Attract, grow, engage and inspire transformational leaders and energize the employees to deliver extraordinary results for all our stakeholders. Best Buy understands and appreciates the invaluable role played by its workforce -- especially its "Blue Shirts" and Geek Squad agents -- in winning and serving customers every day. It will continue to invest in their training and engagement in support of its strategic objectives.
The company has struggled with that in the past and Legere's comments suggest that those problems remain almost two years since the new CEO launched "Renew Blue."
As a regular Best Buy visitor and sometimes shopper myself, I can attest it's hard to see a real difference in customer service. Salespeople on the floor can be difficult to get a hold of, are often unaware of the company's price matching policies, and are not particularly product knowledgeable. In general, in my experience, it would be more accurate to describe the checkout clerks in the two locations near my Connecticut home as "disengaged," rather than the "rude and horrible" Legere used. But "excellent" or even "concerned" don't pop into my head when buying something from either store.
How is the Best Buy turnaround going?
Joly's cost-cutting efforts, which have cut $900 million in expenses, have put the company on more solid financial ground. Sales continue to fall, but added efficiency makes the company more profitable despite its declining business.
"In the second quarter, we delivered $8.9 billion in revenue and $0.44 in non-GAAP diluted earnings per share versus $0.32 last year. The ongoing benefits of our Renew Blue cost reduction and other SG&A cost containment initiatives drove these better-than-expected results," Joly said in the company's most recent earnings release.
That's good news -- a sign that Joly's plans are having an impact -- but at some point the company needs to reverse its sales slide or it won't be able to cut enough to make up the difference. Best Buy has huge infrastructure costs due to its large, expensive-to-operate stores and ultimately its success depends largely upon the customer service experience.
Can Joly make it work?
It was unfair for Legere to take to Twitter to slam Best Buy based on one poor customer service experience. He needs to remember that he's not an unknown peson attacking a restaurant on Yelp. He's an influential CEO with 610.000 Twitter followers (and media jerks like me) hanging on his every word. Still, it would be easier to dismiss Legere as a crank writing about a singular event if his experience was not similar to my own.
Joly has a near impossible task facing him. It's one thing to offer more training and attempt to engage your workforce and another entirely to build a culture where low-paid retail workers care deeply. Building that culture is possible, Starbucks has done it, but it's not easy, especially when coupled with cost cutting. If people are going to make big-ticket purchases at Best Buy, the company needs a staff that makes them feel confident in spending a lot of money.
Best Buy does not have that yet and its future may depend on whether it can get there. You can't cost cut your way out of steadily declining sales. At some point, Best Buy will either become a trusted place people are willing to shop, or it will become another notch on the Internet's belt.
Daniel Kline has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.