Profits rise at Carphone Warehouse

Carphone Warehouse has delayed a decision on the next steps for its loss-making UK consumer electronics megastores business until the autumn, mulling the wisdom of expanding as consumer demand slides.

Europe's biggest independent mobile phone retailer, which owns 50 per cent of a venture with United States electricals retailer Best Buy, currently trades from 10 Best Buy-branded megastores in the UK.

Investors had expected a decision on a roll-out today but Carphone disappointed them, saying it was still in the process of evaluating its multi-format, multi-channel consumer electronics strategy.

"We did hope to have it finished by June time, it's now looking like it's going to be anything up to another two or three months before we've finished all the evaluation," chief executive Roger Taylor said, adding that there had been no disagreement with Best Buy.

He said the joint venture's aspiration to have a market leading position in consumer electronics had not changed.

The Best Buy Europe venture, which also includes Carphone's mobile phone stores and a profit sharing agreement on Best Buy mobile shops in the US, had previously talked about the potential for a chain of 80-100 megastores.

However, UK consumer electronics sales have been hit hard as shoppers cut back on discretionary purchases in the face of rising prices and government austerity measures.

Home Retail, Britain's biggest household goods retailer, reported a plunge in sales at its Argos stores on Thursday, while today Tesco, the UK's biggest retailer missed forecasts for first quarter sales.

Electricals groups Dixons and Kesa, which will post updates next week, have both warned on profit this year and there has been speculation Kesa may exit its Comet business in the UK.

The megastores update came as Carphone, which also owns a 47.5 per cent stake in Virgin Mobile France, posted an expected 80 per cent rise in 2010-11 earnings.

Earnings per share were 15.0 pence in the year to March 31st, in line with company guidance of 14.5-15 pence, despite £62.2 million of losses at the UK megastores.

The firm was boosted by strong demand for smartphones, tablet computers and US growth..

It will pay an inaugural dividend of 5 pence and said it was "well positioned" to maintain its momentum despite the tough economic environment.

For the year to end-March 2012 the firm forecast Carphone Warehouse Europe like-for-like revenue in the range of down 2 per cent to up 2 per cent, with headline EBIT of flat to growth of 10 per cent.

It forecast Best Buy Mobile US connections growth of 20 per cent and profit share growth of 20 per cent to 30 per cent.

Reuters