Carphone Warehouse scraps European big box retail strategy; sells US stake to Best Buy - Mobile World Live

Carphone Warehouse scraps European big box retail strategy; sells US stake to Best Buy

07 NOV 2011

Carphone Warehouse, Europe’s largest mobile phone retailer, is to close its so-called “big box” stores in Europe that form part of its Best Buy Europe JV with US partner, Best Buy, amid signs of stiff competition and a tough operating environment in the European retail sector.

The UK-based retailer also said it is to sell its stake in the corresponding US business (Best Buy Mobile) to Best Buy for US$1.3 billion, promising to return the proceeds to shareholders. Unlike the European business, the five-year old US venture is understood to be thriving.

The winding down of the European business will lead to the closure of the 11 Best Buy-branded stores already up-and-running in the UK with the firm pledging to concentrate investment instead on its existing “small box” Carphone Warehouse-branded stores. It hopes to redeploy the “large majority” of those employees affected by the move to other areas of its business.

“After conducting a thorough strategic review of our operations, we believe that our capital investment and ‘connectivity’ strategy should be prioritised within our Carphone Warehouse stores as they offer a higher and proven rate of return,” said Andrew Harrison, CEO of Best Buy Europe. “The technology world has changed substantially since 2008 and we are confident we will best serve our customers by investing in a single brand and format rather than two.”

According to Reuters, the UK firm today reported a slightly bigger-than-expected drop in first-half earnings per share to £0.012 from £0.05.5 the year before, due in part to £46.7 million in losses at the UK Best Buy-branded stores business

Meanwhile, Reuters reports that Barclays analysts said Carphone Warehouse was getting a good price for its US stake, noting that the US$1.3 billion price tag was worth more than the entire equity valuation of the UK group when it was demerged from telecoms arm TalkTalk last year.

Moving forward, Carphone Warehouse and Best Buy said they would look to replicate the success of Best Buy Mobile in the US in emerging markets such as China and Mexico.