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Best Buy Closes Future Shop

Minneapolis – There is no future for Future Shop.

Canada’s largest CE specialty chain, which was acquired by Best Buy in 2001, is being rolled into its parent’s flagship brand.

As part of the plan, about half of Future Shop’s 131 stores were shuttered on Saturday, and the balance will be converted to Best Buy stores. The move was designed to eliminate overlap with the country’s 127 Best Buy locations, many of which are adjacent to a Future Shop showroom and even share a parking lot.

Ron Wilson, president/COO of Best Buy Canada, said the subsidiary “will continue to have a strong store presence in all major markets.”

The consolidation will cost upwards of $280 million in lease termination fees, employee severance and other transition charges, and Best Buy also plans to invest as much as $200 million in its remaining Canadian stores and website.

The investments will mirror the company’s Renew Blue turnaround initiatives in the U.S. under president/CEO Hubert Joly, including vendor-sponsored shops and an improved online shopping experience featuring expanded in-store pick-up areas for web purchases and the launch of a ship-from-store program.

The retailer said it will also add major appliances to its Canadian stores and will increase staffing levels to better serve customers.

Best Buy acquired Future Shop, then a 91-store chain, for $360 million in 2001 as the first leg in a failed international expansion strategy that was later retrenched under Joly.

The surviving 65 Future Shop stores will be closed for a week while they are converted to Best Buys. The move will leave the company with 136 big-box and 56 Best Buy Mobile stores in Canada.

In a research note, Janney retail analyst David Strasser called the consolidation “the right decision,” as it will make the north-of-the-border business more efficient and profitable, continuing a long line of initiatives across the enterprise.

“This is another example of an analytically-driven management team making better decisions for consumers, shareholders and vendors,” Strasser observed.

Best Buy’s action follows more aggressive northern moves by other major U.S. retailers including Sears, which has reduced its investment in Sears Canada by nearly half, and Target, which will shutter its Canadian operations next month.

Sony is similarly expected to complete the closure of its 14 Canadian stores this month.

A holiday blog in the Canadian edition of the Huffington Post suggested that the country may be headed for a “retail bloodbath” as oversaturation and e-commerce take their toll on that market.