Rent and rates bill for exiting stores to total more than £14 million a year.
Best Buy and Carphone Warehouse have announced the closure of all 11 stores after Best Buy paid £1.1 billion ($1.7 billion/ €1.3 billion) for a 50 percent stake in Carphone Warehouse’s retail division.
The 11 outlets are based in Bristol, Croydon, Derby, Dudley, Enfield, Hayes, Liverpool, Nottingham, Rotherham, Southampton and Thurrock are set to close.
UK newspaper The Independent has speculated on the continued cost Best Buy may experience following plans to close the 11 stores after their opening last year.
The American consumer electronics supplier announced the decision to pull out of the UK last week after all of the stores failed to turn a profit.
Writing for The Independent, Laura Chesters said “the lack of demand from retailers in the out-of-town retail sector could mean that Best Buy’s rent and rates bill will be nearly double what it had expected to pay if it cannot extricate itself from the leases.”
The rent and rates bill is currently estimated to amount to more than £14 million ($22.3 million/ €16.3 million) a year.
“The leasing market in this sector is tough,” commented Richard Allsop, an agent at Morgan Williams, a UK retail property advisor. “Many of the Best Buy units have restrictions against the sale of food, clothing, and mezzanine floors, this could reduce their appeal. The cost of
having a store the size of a Best Buy empty would be around £1.25 million ($1.9 million/ €1.45 million) a year in rent and rates.”
Best Buy identified write downs at “£40 – £45 million” ($64 – $72 million/ €47 million – €52 million) in a statement, and estimated “that the group’s share of the total net cash investment from inception to closure will be in the region of £100 million” ($159 million/ €116 million) although this increase with severity should Best Buy be required to pay reverse premiums to pass on the leases.