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Business Watch: Carphone megastore strategy crumbles

It seems possible, after it emerged that the company and its US partner Best Buy are chewing over the future of the loss-making “big box” stores business.

When first announced, the move into megastores looked like another stroke of genius from Carphone founder Charles Dunstone.

Back in 2009 the property market was crashing, and the joint venture he set up with Best Buy looked set to pick up lots of cheap out-of-town space to build on as developers cut their losses and sold off land cheap.

But the problem is that the much-hoped-for recovery in consumer demand has failed to materialise in force. Indeed, consumer demand is now on the slide again with fears of a double-dip recession.

At Carphone’s annual results this week it revealed that losses at the Best Buy-branded megastore division, which currently trades from 10 stores in the UK, had trebled to £62 million.

And despite news having leaked beforehand that the business was under review, investors were disappointed to learn that a final decision on the next steps has yet to be made.

Carphone, which opened the first Best Buy Europe store in Thurrock, Essex just over a year ago, said it was still in the process of evaluating its multi-format, multi-channel consumer electronics strategy.

“We did hope to have it finished by June, but it’s now looking like it’s going to be anything up to another two or three months before we’ve finished all the evaluation,” chief executive Roger Taylor told Reuters. He added that there had been no disagreement with Best Buy.

Taylor also says that “all options are on the table” and estimates that it would cost about £40 million to exit property leases on Best Buy UK’s existing stores if that were to ultimately happen.

When Best Buy first announced plans to come to these shores, it said it could have 100 megastores by 2013, but that target was later trimmed to 80.

Since then, the coalition Government has announced a slew of austerity measures that have hit many consumers in the pocket, denting discretionary spending on big-ticket items like consumer electronics.

Best Buy and Carphone are not alone, of course.

Household-goods giant Home Retail has reported a plunge in sales at its Argos stores; Dixons and Kesa – which might sell Comet – have both had profit warnings this year. Even Tesco’s missed its sales targets.

Your Questions About Buy Washing Machines Uk - Mini Washing Machine

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A second-hand machine?

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