Best Buy can’t walk on water

The bosses of Britain’s biggest electricals retailers, DSGi and Comet respectively, have been treated pretty much as has-beens ever since Best Buy of the US revealed in May that it was headed across the Atlantic in partnership with Carphone Warehouse.

It was assumed that Best Buy, globally renowned for its retailing excellence, would swiftly make toast of the UK incumbents. But the troubles afflicting the electricals sector are weighing just as heavy in the US as they are this side of the pond. Circuit City has sought Chapter 11 bankruptcy protection and, last week, even the mighty Best Buy showed it could not defy the downturn’s gravity. In dramatic language usually avoided by US store chiefs, Best Buy chief Brad Anderson issued a profit warning after “rapid, seismic changes in consumer behaviour” created the worst trading climate the retailer has ever experienced.

Domestic strife must make the prospect of launch next year in recession-stricken Blighty more daunting than ever. But Browett and Harvey, having had a brief chuckle at their rival’s discomfort, will also recognise that Best Buy’s misfortunes mirror their own and life won’t be getting any easier. Best Buy hasn’t messed up; it’s just been hit by the tsunami that has washed out retailers from London to LA.

Carphone – whose retail arm is now called Best Buy Europe – said at Tuesday’s interims that it was “well positioned in a tough environment”. The numbers back up that confidence. Yes, retail earnings were down – partly a result of investment – and yes “the next 12 months are likely to represent the most challenging climate we have ever operated in”.

But the business is practically debt-free and founder Charles Dunstone maintained that the retail arm “has been further strengthened by the creation of our joint venture with Best Buy, which will accelerate the development of our retail business in a way which would not have been possible on a standalone basis”. There’s no sign that Best Buy’s domestic problems will result in a delay of the European launch or scaled-back opening plans.

UK electricals may be bloody at the moment, but the three big players are limbering up for a fight to emerge strongest once trading conditions improve. The events of the past week do not make Best Buy any less of a threat but have shown that, contrary to some of the wilder comment that greeted its UK ambitions, it cannot walk on water. Browett and Harvey are likely to prepare for battle with renewed vigour.

George MacDonald is deputy editor of Retail Week