1,000 jobs at risk in Carphone Warehouse move
Monday 07 November 2011
More than 1,000 jobs were in jeopardy today after a push by Carphone Warehouse and America's Best Buy to crack the UK electronics market ended in failure.
Best Buy's 11 "big box" stores will close by the end of 2011 after it made losses of £46.7 million in the six months to September and Carphone said current trading conditions meant the venture did not have a viable future.
Carphone and its partner Best Buy launched their joint-venture in 2008 with a promise to shake up a market dominated by Currys and PC World owner Dixons Retail and Comet, although the first store did not open until 2010.
Best Buy originally planned 200 stores in Europe by 2013, and hoped to undercut the competition on price and offer American-style customer service.
Despite a £1.1 billion investment, its launch coincided with the downturn, which saw a substantial drop in demand for sales of TVs, video consoles and computers, while the growing popularity of the internet added to its woes.
Other retailers such as Comet owner Kesa Electricals and Dixons have issued profit warnings in recent months.
Carphone said it hopes to find work for the "large majority" of 1,100 staff within its 805 stores in the UK, which are increasingly focusing on selling more electrical goods such as smartphones and tablet computers, particularly through its Wireless World format.
Best Buy Europe chief executive Andrew Harrison said: "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."
Best Buy UK currently has big box stores in Aintree, Bristol, Croydon, Derby, Enfield, Hayes, Hedge End, Merry Hill, Nottingham, Rotherham and Thurrock.
Best Buy UK expects further losses of between £25 million and £30 million before the shops are closed. The cost of closing the stores will be up to £75 million, while write-downs of £45 million in the value of the business are also expected.
Kate Calvert, an analyst at Seymour Pierce, said: "It's been incredibly difficult for anyone to make any money out of electricals in recent years.
"They tried to launch at a very difficult time - anything that involves selling big-ticket items at the moment is a struggle."
She added that Carphone also lost the element of surprise by flagging up its launch in advance, giving rivals such as Dixons time to sharpen their offers.
Meanwhile, Carphone also announced it had sold its share in Best Buy Mobile, its US mobile phones joint-venture with Best Buy, for £838 million.
The sale will trigger a £235.8 million pay-out for Carphone Warehouse founder Charles Dunstone, who owns a 29% stake in the company.
Carphone also reported that its European business suffered a 3.9% like-for-like sales decline in the half-year.
It said the pre-paid mobile phone market remained weak and it had suffered as more customers moved on to 24-month contracts in the UK. Underlying profits at the division more than halved to £20 million.
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