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Wednesday, 9 November 2011

Tough Economic Times: Best Buy is Gone, Comet is Changing Hands

Two major shake ups has happened in the UK retail industry this week: on Monday, the Carphone Warehouse announced closure of all the 11 Best Buy superstores in the UK, and today Kesa has announced that it will sell Comet electronics retail chain for only £2.

Best Buy has entered the UK in 2008, when Best Buy Europe was formed. The Best Buy has paid £1.1 bn to buy 50% share in Carphone Warehouse's retail division. Since then 11 superstores has been opened in Liverpool, Derby, Bristol, Nottingham, Rotherham, Dudley, Thurrock, Southampton, and three places in London - Croydon, Hayes and Enfield. The closure Best Buy's operations in the UK leaves 1,100 jobs redundant. Carphone Warehouse explains this move by significant changes in the economic conditions since 2008. Some experts believe though that Best Buys has set extremely aggressive price tags on its goods, and this was one of the major reasons behind the failure, changing economic situation and the below forecasted trade volumes have made the sales not profitable, since the margins of the stores were indeed “marginal”.

Today, it was revealed that another retail giant, Comet, owned by Anglo-French electrical goods retailer, Kesa, is also facing difficult times. Kesa has announced plans to sell off Comet stores to a private equity firm for just £2. The buyer is a group of companies under the name "Hailey" advised by retailer turnaround specialists OpCapita. The buyers have made a commitment to maintain Comet operating for at least the next 18 months. Yet some of 250 Comet outlets will be closed as a result of this transaction, the buyer has already confirmed closure of 17 outlets, and further 9 in the next three years, for achieving better economy of scale.

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