Best Buy is getting out of the European market a little less than five years after announcing a European joint venture with retailer Carphone Warehouse, known as CPW. Best Buy will sell its 50 percent stake in the JV back to CPW for around $775 million.
The venture, Best Buy Europe, was first launched in June 2008 with much fanfare, and Best Buy paid $2.15 billion in June 2008 to increase its 3 percent stake in Carphone Warehouse Europe to 50 percent. The companies had ambitious plans to create a chain of 200 stores across Europe by 2013, but the rollout faltered in the United Kingdom as the global financial crisis hit and roiled markets worldwide.
In November 2011 the partnership started to falter and Best Buy bought CPW's 50 percent stake in their U.S. and Canadian Best Buy Mobile venture for $1.3 billion. At the same time though, Best Buy also closed its initial 11 big-box stores in the United Kingdom to focus instead on the smaller 2,500 Best Buy Europe stores it had in operation under the Carphone Warehouse and Phone House brands. Best Buy and CPW also launched a new retail venture aimed at emerging markets. Best Buy estimated its revenue from Europe to be about $5.5 billion for the current fiscal year ending May 4.
Best Buy CEO Hubert Joly said the agreement will allow Best Buy to simplify its business and strengthen its balance sheet.
Best Buy gets around 25 percent of its revenue from operations in Europe, China and Canada, according to Bloomberg. However, Joly said the company's exit from Europe should not be seen as an indication that the retailer will leave other overseas markets. "Each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses," he said in a statement.
Best Buy has struggled in recent years in the face of intensifying competition from the likes of Walmart as well as online alternatives like Amazon. The company reported flat revenue of $50 billion for the last fiscal year ending Feb. 2. However, for the quarter ended Feb. 2, Best Buy reported its first same-store sales gain in more than a year and trimmed its loss to $409 million, compared with a loss of $1.82 billion in the year-ago period.
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this CNET article
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