CPW's Dunstone admits 'dread' over state of the economy

Charles Dunstone, chief executive of Carphone Warehouse, has warned staff in an extraordinary internal email that the future is looking bleak for the firm unless it takes serious action to cut costs.

The mail, sent to us by a TalkTalk insider, begins reasonably cheerfully, noting the 6.5 per cent increase in like-for-like sales, but noted "despite the great sales figures, we actually made less money this year than last".

Dunstone warned that the next year will remain a very tough market coupled with the fact that suppliers, billing in dollars and euros, are likely to continue to put up prices because of the weakness of sterling.

He said the only way to stay competitive was to reduce costs.

The email said: "We are going to begin a programme of taking meaningful sums out of our costs. It takes a staggering £800 million pounds a year to run our retail and distribution business in the UK and rest of Europe and a further £550million to run our fixed line business; we have to reduce this figure."

Dunstone said he was asking managers to propose how to make savings.

Sounding an ever more desperate tone, the mail continued: "To my mind the next 12 – 18 months are about ‘staying alive’. Those who are still standing by 2010 will have a bright future, with much less competition to face for when the economy improves. Until that time, it is going to be a war... competition will be very aggressive and dying businesses can act irrationally ."

Dunstone said he needed two things from staff, declaring "Every pound is a prisoner" - staff must be more cost-conscious, and "we need to maximise every sales opportunity... The greatest return we can make as a business is by connecting more customers to our own network."

The mail added: "I am sorry to have to send such a grim message, but I feel it is my duty to prepare us for the worst; everything I read and observe fills me with dread for the state of the whole global economy. Every single one of us is now paying for the mistakes that were made by financial institutions and their regulators over the past decade.

A spokesman for the firm said it did not discuss internal emails.®