Carphone Raises Forecasts Again After TalkTalk Split
Carphone Warehouse Plc (CPW), the U.K. mobile-phone retailer that demerged its TalkTalk unit this year, raised forecasts for the third time in six months after selling more smartphones in the U.S. and Europe.
Earnings before interest and tax at Carphone Warehouse Europe will rise 15 percent to 20 percent in the year ending March 2011, the company said today. The Best Buy Mobile unit will probably grow at the same rate, Carphone said. The shares rose as much as 5 percent to the highest since the demerger.
The retailer is benefitting as U.K. customers purchase more smartphones including Apple Inc.’s (AAPL) iPhone. Apple said last week that iPhone shipments doubled to 8.75 million in its fiscal second quarter. Same-store sales at Carphone Warehouse Europe rose 3 percent at constant exchange rates in the fourth quarter.
“Results, guidance for the full year and for 2011 are all better than expected,” UBS AG analyst Andrew Hughes said in an e-mail. “Gross margins remain firm, helped by smartphones.”
The shares climbed as much as 9.8 pence to 204.5 pence, and were trading at 200 pence as of 11:25 a.m. in London trading.
So-called headline per-share earnings in the year ended March 2010 were 8 pence to 8.4 pence, the London-based company said today, forecasting growth of 40 to 45 percent this year.
‘Trying to Catch Up’
“Everyone is trying to catch up with Apple, so this quarter smartphones have just gone up,” Chief Executive Officer Roger Taylor said in a phone interview. “Almost 50 percent of all phones sold in the U.K. were smartphones.”
Carphone consists of a 50 percent stake in Best Buy Europe, a retail business operated jointly with Richfield, Minnesota-based Best Buy Co. (BBY), a 47.5 percent stake in mobile-phone company Virgin Mobile France and several property assets. Best Buy Europe is Europe’s largest mobile-phone retailer, with more than 2,400 stores in nine countries. It also has a profit sharing agreement with Best Buy Mobile, which runs stores in the U.S.
Connections at Best Buy Mobile increased 34 percent in the fourth quarter, a “blowout number” according to UBS’s Hughes.
Carphone is introducing its first Best Buy large format electronics store in the U.K. on April 30, selling products such as electric cars, laptops and bicycles, with plans for another three outlets this year. The unit will incur an increased loss of 40 million to 45 million pounds this year, the company said.
The rollout of the U.K. ‘Big Box’ stores and an online offering in the summer will continue as a trial for a year before a decision is made on a larger push, the CEO said.
“We’re saying ‘be patient with us’ this year,” according to Taylor. “It’s quite different to current consumer electronics outlets and after we’ve been through this year we can stand up and be clear about our intentions.” He declined to comment on when the unit would be profitable.
The CEO said his “gut feeling is we will have a 2010 of continued consumer stability” after the U.K. general election.
The executive said the retailer is also adapting 100 of its Carphone Warehouse outlets to its ‘Wireless World’ concept, which sells computer games, laptops, software and a wider range of accessories.
“It’s about the development of the store portfolio rather than increasing store numbers,” he said.
The company doesn’t plan to pay a dividend in the “short term” and will reassess the policy next year, Taylor said.
To contact the editor responsible for this story: Celeste Perri at email@example.com.