What's a pizza guy know about electronics? Probably just enough to turn on the big screen TV in his living room, but Domino's Pizza (NYSE:DPZ) president and CEO J. Patrick Doyle knows a lot about resurrecting an ailing company, and that could be just what Best Buy (NYSE:BBY) needs to keep its turnaround moving in the right direction.
The electronics superstore announced this week Doyle was joining its board of directors, calling his tenure at the pizzeria "nothing short of remarkable" and indicating his experience at turning around Domino's will be invaluable in marking the change at Best Buy.
It's hard to argue with the logic.
Doyle joined Domino's in 1997 and served the company in various leadership capacities, both domestic and international, until he took over as president and CEO in 2010. At the time, he launched what was a remarkable advertising campaign that has since witnessed revenues rise by nearly a third, profits almost double, and its stock soar 600%.
It's not everyday an executive comes on the air and basically says, "Our products suck." Yet what else can you deduce from advertising that literally says its "crust tastes like cardboard" and the "sauce reminds people of ketchup?"
It was the honesty and commitment to change the public's perception of its pies that has led to such a dramatic turnabout in the pizzeria's performance.
Carving up the global pie
With a global footprint of more than 11,000 stores in more than 70 countries, and generating retail sales of more than $8 billion in 2013, it's some two-and-a-half times bigger than rival Papa John's Pizza (NASDAQ:PZZA) and five times larger based on an annual revenues
Although Best Buy had annual revenues of $42.4 billion last year from some 1,400 stores globally, Doyle ought to be able to slice up the troubles that still ail the electronics retailer.
It was around the time Domino's was mapping out its comeback that Best Buy was going into a funk as consumers discovered the joys of showrooming and used the retailers stores as a test kitchen before heading over to Amazon.com (NASDAQ:AMZN) to buy their big screen TVs and stereos.
Revenue growth at the big box store went from 10% in 2010 to 1% the following year as comparable store sales went from a 0.6% increase to falling 1.8% in 2011. It was a period that saw industry peers like Circuit City and Sixth Avenue Electronics go under.
Electronic stores are still short circuiting
Best Buys revenues haven't improved, however, and in its fiscal 2014 report they were 6.7% lower than in fiscal 2012, and were actually below what the company generated back in 2010. Comps were still negative as well, but only off 0.8% for the year, a marked improvement from the year-ago period.
While there was at one point consternation that Best Buy would succumb to the strain likes its rivals, and its founder Richard Schulze even offered to buy back the company at one time and take it private, the electronics superstore has since seemingly stabilized and is no longer quite so precariously positioned financially. It's even doing better than RadioShack (OTC:RSHCQ), whose own demise seems imminent.
The past two quarters have seen it beat earnings estimates by a wide margin and it has taken on a turnaround strategy that it calls Renew Blue, which is intended to control costs while increasing online traffic and in-store conversions, a metric that measures how many of its customers come into a store and end up buying something while they're there.
It must be doing something right because last quarter even though domestic comps fell 2% from the prior period comparable online sales surged 22%.
Now it will be Doyle's task to not only maintain the progress Best Buy has made on its own, but invigorate the company to do more. We probably won't see CEO Hubert Joly on TV telling us his prices suck -- in fact, analysts find the company has almost reached price parity with Amazon -- but we will undoubtedly see improvements made in how the retailer engages its customers.
Change is hard
In the statement announcing his appointment, Doyle noted how hard it is to change a company's course, but he also lauded his fellow board members and executive team as clearly "prepared to do the work necessary to delight Best Buy's consumers."
He's still only one voice on Best Buy's board, but if his work at Domino's Pizza is any indication, we should expect Patrick Doyle will be able to come through and deliver.