As the U.S. consumer electronics market hits the skids, Best Buy is reaching across the Atlantic in a big way.
The Richfield-based retailer said Thursday that it has sunk $2.1 billion into a joint venture with British mobile phone retail giant Carphone Warehouse, a chain of 2,400 stores in nine countries.
Under the agreement, the two retailers will form a new company in which Best Buy will own a 50 percent stake. The new company will include all of Carphone Warehouse's stores in such countries as Great Britain, Spain, France and Portugal. It also includes Carphone's Web and other businesses.
The stores will continue to operate under the Carphone Warehouse and Phone House names, but plans call for new, large-format stores to open under the Best Buy logo in Europe in 2009.
Best Buy has stores in Canada and China, and has announced plans to expand into Mexico and Turkey in the near future. But with cash-strapped consumers in the United States shying away from discretionary purchases, Best Buy's stretch into Europe may be a timely move.
In a conference call, Best Buy CEO Brad Anderson lauded the deal's "extraordinary" growth potential.
Anderson noted that the $175 billion overseas consumer electronics market has been the fastest growing category for the past five years. The Carphone Warehouse deal "gives us a chance to compete in the European market that gives us a long-term growth horizon that we think is extraordinary," he said.
In Europe, where land is limited and government regulation tight, a partnership appears to be less expensive and less risky than a solo expansion, some analysts observed.