Best Buy to Buy Source?

The Source on the auction block, could see interest from Best Buy: analysts
David Friend, THE CANADIAN PRESS
January 21, 2009
TORONTO - The Source by Circuit City is on the auction block this week as bidders vie for the national chain of Canadian electronics stores, which formerly operated under the Radio Shack banner.
Some analysts say the small-scale stores, many of them in shopping malls and neighbourhood plazas across the country, could offer up an attractive opportunity for Best Buy Canada.
The Source's current owner, fallen U.S. retail giant Circuit City, announced last week it would be liquidated after it failed to find a buyer or financing while under Chapter 11 bankruptcy protection.
In Canada, The Source's 765 stores are operated by Circuit City's subsidiary InterTAN Canada, which says interested buyers are expected to present formal proposals to an Ontario court on Jan. 23.
John Williams, of J.C. Williams Group Ltd., for instance, says Best Buy could use the Source operations to gain smaller stores to snag a different segment of shoppers.
"The store plays a role in retailing. Not everybody wants to go to a big box store," Williams said.
"Best Buy is a company that's used to running different formats."
Williams says Best Buy has been diversifying its store formats in other countries.
Last December, the company opened a lifestyle store in Shanghai that specializes in digital products, and doesn't carry the big box store's line of appliances and home theatre systems.
In Canada, Best Buy recently delved into a small-store concept with three stand-alone mobile phone outlets in the Toronto area.
The locations offer phones from most available carriers, including Bell (TSX:BCE), Rogers (TSX:RCI.A), Telus (TSX:T) and smaller names like Koodo and Virgin.
Best Buy's new concept would mirror the Telephone Booth retail outlets, which have operations in British Columbia, Alberta, Quebec and Ontario.
Other potential bidders for The Source could include venture capital companies or other retailers.
One analyst, who asked to remain nameless, suggested that The Source offers an attractive incentive for an electronics retailer looking to expand across the country.
"In Canada it's been an interesting business model in the sense that it's worked by contrast to some others (that) we've seen come and go," he said.
"Anybody looking for street-level distribution would be excellent."
InterTAN Canada, which filed for protection under Canada's Companies' Creditors Arrangement Act, or CCAA, the same day its parent sought Chapter 11 protection in the United States, says it has received numerous expressions of interest.
InterTAN says it won't be part of Circuit City's liquidation and it will continue business as usual while the sale process unfolds.