Editor’s note: A previous version of this article mentioned that Richard Schulze was rejoining Best Buy’s board, which was incorrect. Mr. Schulze became Chairman Emeritus, but did not rejoin the board. Insider Monkey regrets the error.
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, Inc. (NYSE:BKS), Best Buy Co., Inc. (NYSE:BBY), and now J.C. Penney Company, Inc. (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, Inc. (NYSE:BKS) 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 Corporation (NASDAQ:MSFT) 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, Inc. (NYSE:BKS) 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 Co., Inc. (NYSE:BBY) 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 Co., Inc. (NYSE:BBY) 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 become Chairman Emeritus, but would not rejoin the board.
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 Co., Inc. (NYSE:BBY) 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 Co., Inc. (NYSE:BBY) 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 Company, Inc. (NYSE:JCP). 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 Company, Inc. (NYSE:JCP) 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 Company, Inc. (NYSE:JCP) 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 Company, Inc. (NYSE:JCP) 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.
The article 3 Companies Returning to Their Roots originally appeared on Fool.com and is written by Andrew Marder.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
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