Best Buy to kill off UK 'Big Box' stores

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Best Buy to kill off UK 'Big Box' stores

Alex Scroxton

Over 1,000 jobs in the electronics and IT retail sector are under threat after Carphone Warehouse and its US partner Best Buy pulled the plug on their UK retail joint venture, with the shutters coming down for good at its 'big box' retail stores after Christmas.

Speaking this morning, Carphone CEO Roger Taylor said that while the format had "performed exceptionally at the level of customer satisfaction" it did not have the national reach to achieve scale and brand economies.

Taylor claimed the decision to scrap the project came: "Due to the lack of visibility of an acceptable rate of return on historical and future potential investment."

"Our immediate focus is our people and we are confident that the large majority will be offered alternative positions elsewhere in our UK business," he added.

Best Buy's ambitious plans for the UK were first announced in 2008 but the impact of the credit crunch it became rapidly clear that it had made its move in the wrong place at the wrong time, and the opening of its first store at Essex's Lakeside complex was pushed back to spring 2010.

It had wanted to open 200 shops in the UK, but as consumer sentiment remained mired following the recession, this was later revised downwards and as of today, there are just 11 stores which, in the six months to the end of September 2011, incurred operating losses of £62m within the Best Buy Europe JV.

Further operating losses of £25m to £30m are expected through to closure, with the cash costs of closure expected to add up to between £65m and £75m post-tax, along with non-cash asset write-downs of £40m to £45m. The doomed venture is expected, Carphone said, to cost it close to £100m.

However, it does not spell the end for Best Buy Europe. The two partners also announced the extension of their US Connected World strategy to Europe and formed a new profit share arrangement which it is hoped will replicate the Stateside success of their mobile JV.

Best Buy Europe chief executive Andrew Harrison said the extension of this model would help the firm capitalise on current runaway growth in mobility solutions.

"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," he said.

Meanwhile, Carphone Warehouse today announced its half year figures, with headline EBIT down over 50% to £20m and like-for-like sales down by 3.9%.

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