Best Buy Co. Inc. announced today that it has signed an agreement to sell its China retail subsidiary, Five Star, to Jiayuan Group, a Chinese real estate company.
Best Buy entered China by purchasing a majority interest in Jiangsu Five Star Appliance Co. in 2006, and now operates 184 stores in China. Five Star only began selling online in August when it launched e-commerce site 5star.cn.
“Over the last two years we have worked to improve our business in China and are proud of the progress we have made there,” says Hubert Joly, president and chief executive officer of Best Buy,” “We were recently approached by Jiayuan Group, a respected Chinese investment group, which offered to acquire the business with plans to further expand it.”
Best Buy and Five Star faced fierce competition in China. There are two national consumer electronics chains, Gome Electrical Appliances Holding Limited and Suning Appliance Company Ltd., which dominate consumer electronics retailing offline and online. In contrast, Five Star is a smaller retail chain, and most its stores are located in the south of China.
Online marketplaces such as Alibaba Group’s Tmall.com and e-retailers like JD.com also compete with Five Star.
Best Buy says selling Five Star does not suggest any similar move to sell subsidiaries in Canada or Mexico. “Instead, it allows us to focus even more on our North American business.” Joly adds.
Best Buy did not say how much it received for Five Star. But the company says it is not expected to have a material impact on the results of operations, financial position or cash flow of Best Buy.
The transaction is subject to regulatory approval and expected to close in the first quarter of fiscal 2016, according to Best Buy.
Best Buy ranks No. 15 in the Internet Retailer Top 500. JD.com ranks No. 1 in the China 500, Suning is No. 2 and Gome No.7 in the China 500.