A perceived lack of support and questions over the Five Star electronics chain’s future may have played roles in Nicolas Wang’s resignation.
Pedestrians walk past Best Buy, the No. 1 U.S. consumer electronics retailer, Thursday Dec. 28, 2006, in Shanghai, China. Best Buy is opening its first outlet in China, teaming up with a local partner to tackle the hyper-competitive market for gadgets and appliances. In a so-called "soft opening," the store opens its doors to regular customers Thursday.
Best Buy’s top executive in China has resigned amid a growing belief among analysts and investors that the company will soon exit the international stage.
Nicolas Wang, a senior global vice president and CEO of the Five Star electronics chain in China, left Best Buy Co. Inc. this week to “pursue other community and business interests,” the company confirmed Wednesday.
“Nicolas has been a key leader in Best Buy’s China operations,” Shari Ballard, president of Best Buy International, said in a statement. “We are grateful for his many contributions and his colleagues and I wish him the very best as he enters the next phase of his life and career.”
Wang leaves Best Buy at a time when analysts expect new CEO Hubert Joly to eventually divest the company’s international assets, including Five Star and its joint venture with Carphone Warehouse in Europe. Such a move could generate $600 million to $900 million for Best Buy, said Daniel Binder, an analyst with Jefferies Co., in a recent research report. The company could use that money to focus on Joly’s more pressing priorities: fixing core store operations in North America, overhauling its inventory management systems, redesigning bestbuy.com and matching competitors’ prices.
“There is a lot of debate as to whether they should keep Five Star,” said a source close to Five Star. “Best Buy is committed so far, but that doesn’t go to the point of staying with it for too long.”
The company said it plans to replace Wang, whose Chinese name is Wang Jianrong. Best Buy declined to comment about the future of Five Star.
Joly, who joined Best Buy last fall, has voiced skepticism about the wisdom of expanding overseas.
“Retail is not the most global of businesses by any stretch of the imagination,” Joly told investors in New York last November. “China is not a goal unto itself. If we can’t find a way to make the business successful, then we shouldn’t be in China.”
In many ways, Five Star, which operates over 130 stores in China, represented the height of Best Buy’s global ambitions. The company bought the fourth-largest consumer electronics chain in China for $180 million in 2006. At the time, Best Buy’s game play for entering a foreign country consisted of buying a local chain of stores and building traditional American-style big-box stores under its own banner.
But that plan never caught on with foreign shoppers, forcing Best Buy to eventually shutter its big-box stores in China, United Kingdom, Turkey and Canada.
However, Five Star proved to be the growth engine for international sales, helping to offset poor results from Best Buy’s operations in Europe.
In fact, Five Star and China played a prominent role in the turnaround plan offered by then-CEO Brian Dunn in early 2012. At the time, Best Buy said it wanted to operate about 400 to 500 Five Star stores in China by 2016, with the goal of generating $4 billion of sales.
But Best Buy’s recent management turmoil, fueled by Dunn’s resignation and founder Richard Schulze’s unsuccessful attempt to take the company private, largely put those plans on hold. During Joly’s first week on the job, he told the Star Tribune the United States was his first priority.
Five Star has also started to struggle, due to increased online competition and the end of government stimulus programs. Binder of Jefferies estimates sales at stores open for at least a year in China fell 20 percent in fiscal 2013.
“We think it is a matter of when, not if, the China and European businesses are sold,” Binder wrote.
The source close to Five Star who knows Wang well said the Chinese executive was frustrated by the lack of attention and support from Best Buy’s corporate headquarters in Richfield.
During Joly’s tenure, chief financial officer James Muehlbauer, North America stores chief Mike Vitelli and chief administrative officer Tim Sheehan, all executive vice presidents, have left. International CFO Dave Deno, who oversaw Wang, had resigned months before Joly’s hire.