Business Matters: Disappointing Best Buy Quarter Part of Technology Retail Slide
Business Matters: Disappointing Best Buy Quarter Part of Technology Retail Slide

U.S. retail giant Best Buy is to close all 11 of its U.K. stores by the end of the calendar year, it has been announced.

The big box retailer opened its first British store in Thurrock, Essex in April 2010 (, Apr. 27, 2010). A further 10 Best Buy stores have since launched in the United Kingdom, including stores located in Bristol, Nottingham, Enfield and Croydon. Like its U.S. counterparts, U.K. stores sold a range of high-end audio and visual equipment alongside a sizeable provision of entertainment product, including CDs, DVDs and computer games.

Confirmation that all 11 outlets would be shuttered by the end of 2011 - subject to consultation with employee representatives - arrived today (Nov. 7) in a statement from the Carphone Warehouse Group. U.K. cell phone merchant Carphone Warehouse originally partnered with Best Buy in May 2008 to form Best Buy Europe.

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The company estimates the cost of shuttering the 11 Best Buy outlets at between £65 - £70 million (about $104 - $112 million) post-tax. Best Buy Europe has said that it incurred operating losses of £62 ($99) million in the year ended 31 March 2011 and £47 million in the 6 months to 30 September 2011. It anticipates further operating losses of approximately £25 to £30 million ($40 to $48 million) through to closure.

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"The eleven Best Buy U.K. "Big Box" stores have performed exceptionally at the level of customer satisfaction, but they do not have the national reach to achieve scale and brand economies," said Roger Taylor, CEO of Carphone Warehouse, in a statement.

"Due to the lack of visibility of an acceptable rate of return on historical and future potential investment we have decided against rolling out more "Big Box" stores and we will be closing our existing stores, subject to consultation with our employees. Our immediate focus is our people and we are confident that the large majority will be offered alternative positions elsewhere in our U.K. business," Taylor went on to say.

It is estimated that Best Buy U.K. employs approximately 1,000 staff.

Best Buy's plans for further European expansion have also been scrapped, with the company instead choosing to place a greater focus on the U.S. market.

The store closures sit at the heart of a comprehensive strategic review and overhaul of the existing joint venture between Best Buy and Carphone Warehouse. Best Buy is to acquire full control of Best Buy Mobile. In return for an upfront payment of £813 million ($1.30 billion) and annual consulting payments of £5 million ($8 million) over the following 5 years to the Carphone Warehouse (totaling £838 million/$1.34 billion).

Best Buy Mobile was originally launched in the U.S. in 2006 as a partnership between the Carphone Warehouse Group and Best Buy, through which Best Buy Europe receives a profit share. Best Buy Mobile says that it has seen significant growth and earnings in the U.S. mobile market since launch, which has grown to encompass all of Best Buy's 1,106 "Big Box" U.S. outlets and 247 stand-alone stores. The company plans to increase the number of stand-alone stores to 325 by February 2012, with the total number of Best Buy Mobile stand-alone stores to rise to 600-800 in the medium term. As of March this year, Best Buy Mobile says that it has a U.S. mobile market share of approximately 5%.

Despite relinquishing its share of the U.S. mobile market, Carphone Warehouse and Best Buy will, however, partner on a new profit share agreement that aims to replicate the Best Buy Mobile model in emerging markets outside of North America and Western Europe. The new business partnership, which will target markets in China, Brazil, India and Mexico, is called Global Connect and will be chaired by Carphone Warehouse CEO Roger Taylor.