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January 24, 2013 10:50 pm
Strong sales for smartphones and tablets in the UK helped boost revenues ahead of expectations in the third quarter for Carphone Warehouse, Europe’s biggest independent mobile phone retailer by stores.
The company invested heavily in low prices and bundling deals for tablets in the run-up to Christmas in order to establish leadership in the segment on the high street, taking sales to 40,000 a week from 5,000 every week in the same quarter last year.
The boost in tablet sales helped raise revenue at the group by 7.8 per cent in the three months to December 31, higher than expected, with a particularly strong 16 per cent increase in revenue in the UK offsetting weaknesses in its French business.
However, the push to gain market share in tablets and other connected devices will come at a cost to the group’s profitability, according to Roger Taylor, chief executive.
The company reiterated its earnings per share guidance for the full year of 11.5p-13.0p but narrowed the full-year profit forecasts from between £130m-£150m to £135m-£145m. Shares in the group rose 5 per cent to close at 230p.
“We had a big push on tablets and were particularly aggressive on pricing. We did sacrifice some margin to get the products out there,” said Mr Taylor.
“We decided to invest in the proposition, and I think it worked as this has changed the perspective of where we are in the market.”
Mr Taylor said that the group was already seen as a leader in smartphone sales on the high street and would now also look to target the mid-sized “phablets” that combine the larger tablet functions with those of a phone.
He said that the tablet market had already expanded rapidly, with products available for all types of consumers for the first time this Christmas.
Like-for-like revenue in the UK rose 16 per cent but was flat in mainland Europe. The company said that the French market, which has been disrupted by the arrival of the Iliad’s low-cost mobile operations, was “particularly challenging” given cheap, SIM-only deals.
The results come as the group awaits a possible move on Best Buy, the US retail chain, which would affect its European business. Carphone Warehouse owns only half of CPW Europe, with the other half owned by Best Buy, which has received takeover interest from Richard Schulze, its former chairman.
Mr Schulze has until next month to tender an offer for the group, which would give Carphone Warehouse an opportunity to acquire its 50 per cent stake in the business as a 10 per cent discount owing to a change of ownership clause in the partnership agreement. Mr Taylor declined to comment on the situation.
Carphone Warehouse also owns half of Virgin Mobile France, which reported revenue growth of 9.9 per cent to €120m in spite of a postpay customer base decline of 17,000 during the quarter.
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