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CPW focuses on Wireless World as sales & profits fall

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Carphone Warehouse (CPW) Europe experienced a 3.9 per cent decline in like-for-like (LFL) revenues for the six months ending September 30th 2011, according to a trading statement published this morning.

The electricals retailer said that the results reflected the impact of an increase in 24-month contracts in the UK and a relatively weak prepay market, but remained confident that its Wireless World format stores and consumer interest in smartphones and tablet devices will help keep sales steady in the second half of the financial year.

It was also announced today, and reported elsewhere on Retail Gazette, that the strategy for the company’s venture with US electricals retailer Best Buy has now changed direction after Best Buy UK recorded losses of £46.7 million for the half-year.

The 11 Best Buy stores that have opened in the UK over the last 19 months are set to close after failing to penetrate the British market in the intended way, resulting in the reshaping of the partnership between the two electricals businesses.

When removing the negative performance of the Best Buy collaboration, CPW Europe still reported a £24.2 year-on-year fall in headline EBIT to £20 million.

Full-year expectations remain the same however, with EBIT expected to be somewhere between flat and ten per cent up on 2010/11.

And despite a positive performance from its Virgin Mobile France operation, profit after tax for the entire CPW Group, which also includes Best Buy Mobile US, decreased to £5.5 million from £24.9 million one year before.

Roger Taylor, CEO of CPW Group, said: “While the announcements we are making today substantially alter the future profile of Carphone Warehouse, our first-half performance in our continuing businesses is firmly in line with our expectations and means we can reaffirm the guidance we have already given for the full year to March 2012.

“The predicted impact of the shift in the UK to 24-month contracts, and a continuing relatively weak prepay market accounts for CPW Europe’s LFL numbers, but we expect the effect of 24-month contracts to be less significant in the second half of the year and we also anticipate the first material impact of renegotiated network commercials, which provide the business with a greater share of revenues beyond the customer contract term.

“In parallel, we continue to enjoy an exciting product pipeline across smartphones and tablets and we are accelerating our development of Wireless World stores.”

Investment in Wireless World saw this format grow to a 197-strong portfolio of stores by the end of September. With a focus on phones, tablets and associated accessories and services, CPW views this area of the business as a strong growth area in the year ahead.

Meanwhile CPW Europe opened or re-sited 104 stores during and close 80 outlets in the six months to the end of September.

It closed the period on 2,453 stores, which is slightly up on the 2,429 in operation at the start of the year.

Published on Monday 07 November by Editorial Assistant

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