8th Nov 11
Carphone Warehouse to pull out of Best Buy
by Harry Oldfield
Not the best: Carphone Warehouse drops Best Buy after £80m in losses
Not the best: Carphone Warehouse drops Best Buy after £80m in losses
Carphone Warehouse is set to bring the curtain down on its joint-venture Best Buy stores, marking an end its attempt to challenge Comet and Currys.
The move will result in 1,100 jobs being put at risk, although the company said it aims to find positions for the majority of the employees elsewhere within the firm. The decision, due to be announced at the same time as half year results, brings an inglorious end to the project which was intended to catapult Carphone from a mobile phone seller to a major electronics company.
Best Buy Europe is a 50:50 joint operation between Carphone Warehouse and Best Buy, the US electronics retailing giant and the world’s largest. It had been hoped that the venture would end up enabling it to become Europe’s number one too. It opened in Europe in 2010 amid talk of acquiring 200 stores by 2013.
However, only 11 were opened and in June the roll out was postponed. So far, the stores have racked up £83m in losses. A further £35m half-year launch is likely to be announced later this week.
Best Buy UK, an arm of Best Buy Europe, has been hindered by management departures and awful conditions for “big box” retailers selling expensive homewares goods in out-of-town retail parks. A moribund housing market and a tough economic climate have meant that large electrical products are low on the priority list of the majority of families. In addition, out-of-town retail parks have been impacted by the fact that high petrol prices have deterred browsing shoppers.
Comet is undergoing a major strategic review, with concerns that there are no willing buyers for the group. Meanwhile, accounts published last weekend for Richer Sounds revealed that the privately-owned firm had experienced its fifth fall in a row in annual profits. The founder and owner Julian Richer has again opted against paying himself a dividend.
The struggling chains accounts for the year finishing April 2011 revealed that Richer Sounds’ pre-tax profits dropped to £2.63m from £2.79m on turnover which was down by five per cent. In addition, profit per employee has dropped from £11,481 two years ago to just £7,737.
However, the 11 Best But shops shutting down is not likely to bring the joint venture to an end. In 2008 Best Buy purchased a share of 50 per cent in Carphone’s retail operations in order to begin the tie-up and it is believed that Best Buy will keep supplying products to be sold in Carphone shops. Tablet computer sales have helped, in some way, offset a decline in customers renewing their mobile phone contracts.
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