Best Buy might be a leading big-box electronics retailer in the United States, but the company doesn’t seem to be able to extend that success to the United Kingdom and Europe. Today, Best Buy announced it will be closing down its nascent big-box store operation in the United Kingdom, shuttering some 11 stores and focusing its European retail operating on an installed base of about 2,500 “small box” mobility stores. Best Buy is also buying out the UK’s Carphone Warehouse’s stake in Best Buy Mobile’s U.S. and Canadian operations for $1.3 billion in cash, giving the company full control over its mobile efforts in the United States.
However, Best Buy and Carphone Warehouse will remain partners: the companies have announced the launch of a new “Global Connect” which will aim to extend the business success of Best Buy Mobile to other worldwide markets, with China and Mexico apparently being first on the list.
“Each of these actions represents an exciting growth opportunity for Best Buy and near and long-term value for our shareholders,” said Best Buy CEO Brian Dunn, in a statement. “No other retailer has our carrier and vendor relationships across all product categories, our well-established multi-channel presence and the Geek Squad ensuring that you walk out with your technology working.”
Best Buy blamed closing the big-box UK store closures on challenging economic conditions. The company opened the stores about 18 months ago, and so far has lost nearly $130 million trying to sustain the operations. The company had initially planned to roll out as many as 100 stores in Britain then expand big-box operations across Europe.
Best Buy says most of the 1,000 or so staff in its UK big box operations will be redeployed to other areas. The company will continue to operate some 2,500 “small box” stores in Europe focussed on mobile technology, upgrading many to the company’s “Wireless World” format.
However, while European big-box stores may have failed, Best Buy Mobile has done relatively well in the U.S. and Canadian markets, leveraging significant consumer interest and market growth in the mobile technology arena. Acquiring Carphone Warehouse’s interest in Best Buy Mobile’s U.S. and Canadian operations puts Best Buy in total control of that business—and lets it reap all the rewards.
Best Buy and Carphone Warehouse partnered on Best Buy Mobile back in 2008, when Best Buy bought half of Carphone Warehouse’s retail business for about $2.1 billion as a way to step into the UK and European retail market. Carphone Warehouse seems to be walking away from Best Buy Mobile with a good price: the buyout is worth more than Carphone Warehouse’s market valuation. The company says it will return the $1.3 billion it receives from Best Buy to its investors.
Earlier this year, Best Buy scrapped plans to open Best Buy-branded stores in Turkey and China.