Best Buy To Exit China With Five Star Sale
Best Buy’s international presence will further shrink with Thursday’s news that the Richfield-based electronics retailer will sell its 184-store Five Star chain in China that it has owned for eight years.
The company will sell the business to Jiayuan Group, a Chinese real estate firm. The deal will effectively end its retail presence in the country as it had previously closed nine Best Buy-branded stores three years ago, according to the Star Tribune. The newspaper reported the company’s international operations account for about 15 percent of its revenue. Best Buy will meanwhile continue to operate procurement and private-label goods operations in China.
Best Buy’s international footprint will be reduced to just Canada and Mexico after the sale. In April 2013, the company struck a $775 million deal to sell its stake in a European joint venture. At the time, CEO Hubert Joly categorized his company’s European exit as an isolated decision, adding that “each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses.”
But speculation that Best Buy would divest its Five Star brand began to swirl around the time it cut ties with Europe. Nicholas Wang, the CEO of Best Buy’s Five Star electronics chain in China, left the company in March 2013, replaced by Meng Zhou. After the sale of Five Star, the company’s chief operating officer, Yiqing Pan, will become chief executive.
In January, Best Buy cut 6 percent of its Canadian workforce, with the elimination of 950 jobs. But the company said it would not close any of its 265 stores there.
In a statement Thursday, Joly sounded a similar tone to his remarks after the 2013 European exit, again reassuring that the Chinese deal “does not suggest any similar action in Canada or Mexico.”
“Instead, it allows us to focus even more on our North American business,” Joly’s statement continued.
The Five Star deal is expected to close early next year and Best Buy said it wouldn’t have a material impact on results and finances. As of mid-morning Thursday, the company’s stock price reflected little change, trading at $36.44, up just 29 cents from its opening price.