Posted on April - 25 - 2010
Carphone Warehouse predicts earnings increase
Carphone Warehouse geared up for the launch of its first Best Buy megastore by raising profits guidance for the third time in six months.
The group, which jointly owns its retail business with US partner Best Buy, said strong sales of smartphones and last year’s cost cuts helped increase earnings growth in Carphone Warehouse stores.
It expects its share of annual retail profits to be around £47m for the year to the end of March – up on the £40m to £45m range given at its last profits upgrade in January.
Carphone and Best Buy are preparing to open the first of its “Big Box” consumer electronics stores in Thurrock, Essex, on Friday.
It will offer initiatives such as a trade-in service where customers can receive discounts when they bring in their old televisions, laptops and mobile phones.
Carphone – spun off from the TalkTalk broadband business last month – plans to pump in another £35m to £40m of investment into “Big Box” store launches in the current financial year.
The venture made a loss of around £21m in the past year and this is likely to widen to up to £45m this year as it opens more outlets.
Following this week’s launch in Essex, it will open Best Buy stores in Hedge End, Southampton, and Merry Hill in the West Midlands in June, with Aintree and Croydon next on the list.
Carphone wants to open between eight and 10 outlets this year, with around 70 planned by 2014.
The group is also opening larger Wireless World stores across Europe as part of the Carphone Warehouse chain and aims to have more than 100 by the end of next March.
Charles Dunstone, chairman of Carphone, said: “The demerger is now successfully completed and we are moving into our next phase of growth.
“Our vision of the ’Connected World’ resonates with customers, as do our principles of impartial advice and knowledgeable service.”
He added that while the wider economy “will undoubtedly present challenges”, the group aimed to offer earnings growth this year.
Carphone is pencilling in profits from its share of the retail business to be held largely firm in the year to next March with Best Buy investment taken into account, guiding for between £47m and £50m.
Sales across its 2,430 Carphone Warehouse stores rose three per cent on a like-for-like basis in the fourth quarter and it is forecasting growth of up to three per cent over the year ahead.
Fourth quarter mobile phone connections were down 2.9 per cent to 2.86m on an underlying basis, down 5.2 per cent with calendar effects not stripped out, but the group said the surge in popularity of more expensive smartphone contracts saw revenues-per-connection rise.
Its Virgin Mobile joint venture in France – in which the group owns a 47.5 per cent stake – is set to report losses of around £9m for the year to March 2010, but Carphone hopes to move into profit by about £5m in the current year.
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