US electronics retailer Best Buy to exit China
04 December 2014
US electronics retailer Best Buy Co Inc today said that it will sell its struggling Chinese business, Five Star, to domestic real estate firm Zhejiang Jiayuan Group and focus on its North American operations.
''Best Buy Co has entered into a definitive agreement for the sale of its Five Star business to the Jiayuan Group, a prominent China-based real estate firm led by chairman Yuxing Shen. This sale does not affect Best Buy's private label operations in China,'' the Minnesota-based company said in a statement.
Best Buy entered the Chinese retail market by acquiring a majority stake in Jiangsu Five Star in 2006, which now operates 184 stores in China, all under the Five Star brand.
The transaction, which is subject to regulatory approval, is expected to close in the first quarter of fiscal 2016.
Best Buy said that the sale is not expected to have a material impact on the results of operations, financial position or cash flow of the company.
''We were recently approached by Jiayuan Group, a respected Chinese investment group, which offered to acquire the business with plans to further expand it. The Jiayuan Group has agreed to work with Five Star COO Yiqing Pan, who will become CEO of Five Star,'' said Hubert Joly, president and CEO of Best Buy.
The sale is part of the retailer's turnaround plan started by Joly after taking reins of Best Buy two years ago.
Best Buy exited Europe last year after selling its 50-per cent stake in Carphone Warehouse Group's European business back to Carphone for $730 million. (See: Carphone Warehouse to buy out Best Buy in European JV for $730 mn)
China has recently become a tough place for overseas retailers to do business due to fierce competition from local retailers and a flourishing online retail business.
Last year, Europe's Metro AG announced that it would exit from the Chinese consumer-electronics business, while US home improvement and construction products retailer Home Depot exited in 2012, closing its seven stores.
French retailer Carrefour is said to be mulling a sale of its China business.