NEW YORK (TheStreet) -- Shares of Best Buy Co. (BBY) are down 0.25% to $35.95 in pre-market trade after the company said that it entered into a definitive agreement for the sale of its Five Star business to the Jiayuan Group, a prominent China-based real estate firm led by Chairman Yuxing Shen. This sale does not affect Best Buy's private label operations in China.
Best Buy entered the Chinese retail market by purchasing a majority interest in Jiangsu Five Star in 2006 and now operates 184 stores in China, all under the Five Star brand. The transaction, which is subject to regulatory approval, is expected to close in the first quarter of fiscal 2016.
The sale of the Five Star business is not expected to have a material impact on the results of operations, financial position or cash flow of Best Buy.
Terms of the deal were not disclosed.
"The sale of Five Star does not suggest any similar action in Canada or Mexico. Instead, it allows us to focus even more on our North American business. We will also continue to invest in and grow our China-based private label operations, with brand names that include Dynex, Insignia, Modal, Platinum and Rocketfish," said Hubert Joly, president and CEO of Best Buy.
Best Buy has struggled to fend off Chinese rivals in a crowded market, as other U.S. firms have complained that operating in the country has become more of a challenge, Reuters said, adding that Best Buy pulled out of the European market last year when it sold its stake in Carphone Warehouse Group for less than half its initial investment. At the time, many analysts suggested the firm should also consider exiting China.