Carphone Warehouse considers retailing future

Big yellow boxes slipping into the red

By Bill Ray, 14th June 2011

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Despite good results from its US expansion, and turning a French loss into a profit, annual figures from Carphone Warehouse show its ambitious plan to change European retailing is consuming a good deal more cash than anticipated.

Losses from joint operation Best Buy UK topped £62m in the last 12 months, more than three times that of the previous year – and £12m more than the company had predicted.

It's a good thing then that Carphone Warehouse Europe turned in a profit of £134.6m (up 18 per cent), and that the group also managed to double its profits from America, with Best Buy Mobile bringing in £97.9m in profit.

Revenues at Best Buy Europe were £3.57bn, up just 1.2 per cent on the year, producing EBITDA of £257.4m, compared to £231.7 last year.

Best Buy Europe, the joint deal to bring the US retailer's big yellow stores across the pond, spent more than £62m in the last 12 months – rather more than the £50m or so the company had predicted. But Carphone Warehouse offset that loss with huge gains in the US, where Best Buy Mobile (taking UK mobile phone sales techniques to the USA) has managed to grab 5 per cent of the US market (seven million subscribers).

Virgin Mobile France – of which Carphone Warehouse owns almost half – also had a good year, turning last year's loss of more than £20m into a similarly-sized profit. That's apparently down to "creative marketing", which increased the customer base by 200,000 or so.

Things aren't so rosy in the UK, where the company expects to shed as much as 5 per cent of its mobile customers over the next year thanks to longer contracts (24 rather than 18 months) and its lack of prepay portfolio. UK contracts are doing OK though, with 90 per cent of new contractees taking up smartphones.

The company remains adamant that as tablets erode laptop and notebook computers, its stores will gain – users like to see and touch rather than basing their decision on a web-hosted photograph. But despite this upbeat prediction, Carphone Warehouse admits it is "in the process of evaluating the next steps in our multi-format/multi-channel consumer electronics strategy". ®

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