Best Buy Closes UK Stores, Buys Out Partner for $1.3B
Best Buy Company, Inc., on Monday announced plans to shutter its 11 big-box retail stores in the United Kingdom and buy out a partner's interest in a joint profit-sharing program in the United States and Canada.
The Richfield-based electronics retailer said that it will pay about $1.3 billion to purchase Carphone Warehouse Group's contractual interest in its Best Buy Mobile chain. Under the previous agreement, Best Buy shared profits from its mobile business with Best Buy Europe-which is 50-percent owned by Carphone Warehouse.
Best Buy Europe operates about 2,500 “small-box” stores throughout Europe under the Carphone Warehouse and The Phone House brands. Last April, it piloted 11 big-box stores in the United Kingdom under the Best Buy banner-all of which will be closed by the end of this year. The decision to close the stores was “based on challenging economic conditions and profit expectations of these stores,” Best Buy said.
Best Buy also announced a new collaboration with Carphone Warehouse called “Global Connect,” which the company says will “provide the intellectual capital and connections expertise” to advise retailers on how to increase performance of their mobile products businesses in return for a share of their profits.
“Each of these actions represents an exciting growth opportunity for Best Buy and near- and long-term value for our shareholders,” CEO Brian Dunn said in a statement. “We are aggressively ramping up our growing connections capability to support consumers' increasingly connected lives across the entire range of devices entering the marketplace.”
In a separate announcement made Monday, Best Buy said that it will acquire MindShift Technologies-a Massachusetts-based managed service provider for small and mid-sized businesses-for $167 million. MindShift provides cloud, data center, and professional services to more than 5,400 clients throughout the United States.
The recently announced moves align with Best Buy's recent shift away from big-box retail stores and its increased emphasis on mobile technologies.
Investment research firm Bernstein Research offered its take on Best Buy's news, stating that the “decision to close down the underperforming U.K. Big-box stores appears straightforward and logical, given the limited prospects of achieving even breakeven profitability . . .” The firm said that acquiring the Best Buy Mobile stake eliminates conflicts of interest arising from the previous profit-sharing agreement, and the MindShift deal “indicates another move by the company trying to re-cast itself as a growth retailer.”
Best Buy is Minnesota's third-largest public company based on revenue, which totaled $49.7 billion for the fiscal year that ended in February 2010. The company reported $50.3 billion in revenue for its most recently completed fiscal year.