THE Chinese market is a very lucrative area to focus and invest in what with billions of consumers who are potential cash cows, but it seems now that prospect is beginning to take a new twist.
In a sudden change of atmosphere, American electronics retail giant Best Buy Co. (BBY.N) is mulling to restructure its overseas foothold with a planned sale of or team-up for its China-headquartered commercial division so the company can better concentrate on its domestic business, based on latest report by the Wall Street journal, citing sources who have knowledge of the issue.
Best Buy stands to earn around $300 million from its Chinese business, where the company runs a corporate operation under the trade names Best Buy Mobile and Five Star, the report disclosed.
BBY is currently in talks with Bank of America Merrill Lynch (BAC.N) to look into its next possible moves and assess its business interests abroad, WSJ noted.
Best Buy operates a chain of retail establishments across the US, Mexico, China and Canada.
According to Amy Von Walter, in an interview with Reuters, they do not issue any comment with regards rumors or speculation on their overseas business.
The biggest consumer electronics retail chain in the globe, which penetrated the Chinese market in 2006, has faced stiff competition with big rivals, such as Gome and Suning, and has fallen short on its target to really position itself as a premier player in the highly-stacked electronics sector.
Best Buy’s move would potentially leave the company without any direct access to what is considered as the biggest economic growth potential in the world. But then, the company believes that letting go of its China operations have other benefits as it could now train its guns on its own backyard.
This strategy could also provide the retail company better cash to pour into other businesses with more growth opportunities like e-commerce and mobile, crucial undertakings that investors have long been lobbying for. In 2013, Best Buy sold its shares in a European partnership to Carphone Warehouse Group (CPW.L).
The company disclosed in May a better-than-predicted quarterly profit, indicating signs that CEO Hubert Joly’s aggressive efforts were paying off.
Joly has turned BBY around since he was tasked to lead the company in 2012, getting rid of redundancies in management, eradicating hundreds of job positions, shutting down outlets that weren’t making any money, and bolstered Best Buy’s cash reserves in a bid to put a lid on falling sales.