19 Jan

Best Buy reconsiders its international operations

WRITTEN BY Sharon Bailey

Best Buy reduces its international footprint

At a time when companies across industries are focusing on international expansion, Best Buy (BBY) is exiting from certain international markets. Internationally, Best Buy has stores in Canada and Mexico.

Best Buy reconsiders its international operations

Weak international business

Best Buy’s international operations accounted for 16% of its fiscal 2014 revenues, down from 17% in fiscal 2013. International revenues declined by 0.4% to $6.58 billion in fiscal 2014, due to lower demand for consumer electronics.

Internationally, the company opened 13 new stores and closed 27 stores in fiscal 2014. Store openings included Best Buy Mobile stores in Canada and Best Buy stores in Mexico. Store closures involved mainly Five Star stores in China.

Moving out of China

In 2006, Best Buy acquired a majority stake in Jiangsu Five Star Appliance Co., the fourth-largest consumer electronics retailer in China.

In March 2011, Best Buy closed all of its nine Best Buy–branded stores in China.

In December 2014, Best Buy announced its decision to sell its Five Star stores to Jiayuan Group, a China-based real estate firm. The sale of the 184 Five Star stores is expected to close in the first quarter of fiscal 2016. The sale doesn’t include Best Buy’s private label operations in China, which include the Dynex and Insignia brands.

Best Buy exits Europe

In April 2013, Best Buy sold its 50% stake in Best Buy Europe, consisting of 2,400 stores, to joint venture partner Carphone Warehouse for $775 million. The company believes that its recent exit from some international markets will help it focus more on its core US business.

Other specialty retailers are also exiting underperforming international regions. For example, GameStop (GME) recently announced its decision to exit the Spanish market. Target (TGT) made its first international move in 2014, opening 133 stores in Canada. It recently announced the closure of these stores in response to mounting losses that were eating away at its bottom line.

Meanwhile, Wal-Mart Stores (WMT) sees its international operations as key growth drivers, especially in emerging markets. In fiscal 2014, the company opened 324 stores internationally.

The SPDR S&P Retail ETF (XRT) has holdings in retailers including Best Buy and Wal-Mart.

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