Best Buy Co. said Thursday that it will sell its Five Star stores in China, ending its eight-year ownership of the 184-store chain.
The move comes three years after the Richfield, Minn.-based company closed the nine Best Buy-branded stores it had in China, and effectively ends its retail presence in the country. Best Buy continues to operate procurement and private-label goods operations in China.
Jiayuan Group, a prominent real-estate firm, will buy the Five Star stores for an undisclosed amount. Best Buy said the transaction, expected to close early next year, won’t have a material impact on its results and finances.
The move is the latest by the company to shrink its international operations. In the company’s announcement, Best Buy Chief Executive Hubert Joly suggested it remained committed to its remaining international operations in Canada and Mexico.
“The sale of Five Star does not suggest any similar action in Canada or Mexico,” Joly said. “Instead, it allows us to focus even more on our North American business.”
Best Buy’s international operations account for about 15 percent of its revenue.
Five Star was the fourth-largest retail chain in China when Best Buy acquired it. It has largely been profitable, though it has reported lower comparable sales in recent periods.
“Over the last two years we have worked to improve our business in China and are proud of the progress we have made there,” Joly’s statement continued. “We were recently approached by Jiayuan Group, a respected Chinese investment group, which offered to acquire the business with plans to further expand it.”
In March 2013, the CEO of Best Buy’s operations in China resigned, and Meng “Max” Zhou was named as the successor.
In late June of this year, The Wall Street Journal reported that Best Buy hired advisers to find a partner or buyer for its business in China, a report that gave its stock a boost. The Journal report placed a value on Best Buy’s China operations at the time at roughly $300 million.
Prior to that report, Joly had stated a commitment to its retail presence in the world’s most populous country amid Wall Street speculation to the contrary.
“Shari (Ballard) and I recently traveled to China and Canada, meeting with the new business leaders there and spending time in our stores,” Joly wrote in his memo to employees, referring to Best Buy’s international president at the time. “I am encouraged by the progress we are making and look forward to continuing to work closely with Shari and our country leaders.”
In April 2013, Best Buy sold its 50 percent stake in Best Buy Europe to joint-venture partner Carphone Warehouse for $775 million in cash and stock. That transaction spurred analysts to speculate that it also would sell the Five Star business in China.
After the sale, the chief operating officer of Five Star, Yiqing Pan, will become its chief executive.
“Mr. Pan has been with the business for many years and has a deep respect for Five Star employees, as well as a vested interest in continuing to work with them to build a stronger presence in China,” Joly said.