Carphone Warehouse has confirmed that over 1,000 jobs are under threat as it pulls the plug on its Best Buy stores in the UK.
The company has launched a consultation about closing the 11 shops as it shifts its focus to selling more electronics goods through its Carphone Warehouse outlets, especially the Wireless World formats.
Carphone said it hopes to find the ‘large majority’ of the 1,100 staff roles elsewhere within the organisation. The move comes as the retailer agreed to sell its Carphone Warehouse stake in a Best Buy retail joint venture in the US to its partner for more than $1bn.
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 operates the so-called ‘big box’ stores across the South East and Midlands, which were launched to great fanfare in 2010 and were intended to shake up the electronics market with cheaper prices and better customer service and recently launched on m-commerce site.
But the company said the market had suffered as a result of the economic downturn, online competition and the growth of new products, such as smartphones and tablet computers.
The business, which launched as part of a joint venture with US-based retail giant Best Buy, has invested heavily in marketing and promotional activity in a bid to get the brand off the ground, but has seen widening losses and closure has been expected for some time.
Executives quit earlier this year prompting the store to review its retail strategy. Carphone originally intended to open up to 200 Big Box stores in Europe by 2013, but this goal was reduced to 100 in June. The stores' future has since been under review.
Best Buy currently has Big Box stores in Aintree, Bristol, Croydon, Derby, Enfield, Hayes, Hedge End, Merry Hill, Nottingham, Rotherham and Thurrock. The partnership is expected to incur a cost of as much as £100m ($160m) in closing the chain
It made a loss of £62 million in its first year in the UK and analysts expect it to report a loss of £35 million in the first half of 2011 alone. Sales were down by 3.9%, which the company said is in line with expectations, affected by the shift to 24 month contracts in the UK, and after a £4.4m reorganisation charge in Germany.
Carphone Warehouse CEO Roger Taylor said: ‘While the announcements we are making today substantially alter the future profile of Carphone Warehouse, our first half performance in our continuing businesses is firmly in line with our expectations and means we can reaffirm the guidance we have already given for the full year to March 2012.
‘The predicted impact of the shift in the UK to 24 month contracts, and a continuing relatively weak prepay market accounts for CPW Europe's like-for-like numbers, but we expect the effect of 24 month contracts to be less significant in the second half of the year and we also anticipate the first material impact of renegotiated network commercials, which provide the business with a greater share of revenues beyond the customer contract term.’
He concluded: ‘We continue to enjoy an exciting product pipeline across smartphones and tablets and we are accelerating our development of Wireless World stores.’
Joe Fernandez