Carphone Warehouse to re-evaluate ailing Best Buy chain
Carphone Warehouse has been forced to reassess its Best Buy UK megastores operation after posting a £62.6m loss in the division for the year.
Best Buy UK’s losses almost tripled for the year to 31 March from the £21m it posted in 2010 and were far greater than analysts’ initial estimates of £45m.
The Carphone Warehouse Group, which owns 50% of a joint venture share of Best Buy Europe, attributed the losses to store developments and investment in marketing and promotional activity to develop awareness of its brand and retail presence.
Best Buy UK initially opened six “Big Box” stores in the UK between 2010 and 2011 and launched a website in November. A further four stores have opened since.
The company had planned to open up to 80 Best Buy stores in the UK, but a tough consumer electronics market, that has seen rival retailers such as Dixons and Argos mark a drop in sales, has stalled plans for such rapid expansion.
Best Buy Europe’s chief marketing officer admitted the company’s UK launch lacked impact earlier this year.
The Carphone Warehouse Group says in a financial statement: “Following this launch period, we are in the process of evaluating the next steps in our multi-format/multi-channel consumer electronics strategy.”
At Carphone Warehouse Europe, the division that operates more than 1,700 stores, grew operating profit by 18% to £134.6m.
The handset retailer introduced several improvements to its customer service in the UK in an attempt to differentiate itself from its competitors, with a heavy focus on smartphones and apps.
Carphone Warehouse says weaknesses in the pre-pay market and lengthening phone contracts, so that people can obtain the latest smartphones quicker, will reduce the number of new connections over the coming year.
Best Buy Mobile US increased profits by 111% to £97.9m on the back of a 20% increase in smartphone connections.
The Carphone Warehouse also owns a 47.5% stake in Virgin Mobile France, which posted a profit of £20.6m for the year and increased its customer numbers by 200,000 to more than 2 million.