Mobile phones seller Carphone Warehouse could be realising that entering a market in which established operators such as Dixons and Comet are already struggling may not have been a smart idea, with the group’s Best Buy UK group suffering larger losses than anticipated.
In its preliminary results announcement covering the year to the end of March, the group announced a 67% increase in earnings before interest and tax to £63.3m from £38.0m a year earlier, despite the Best Buy UK “Big Box” mega-stores seeing losses before interest and tax expanding to £62.2 million from £21 million the year before.
Carphone Warehouse had previously mooted that the unit would lose between £50m and £55m.
“We’re still trying to work out exactly what is the right format for selling consumer electronics within the UK. What are the right profit areas that we should be chasing,” said Charles Dunstone, Carphone Warehouse’s chairman.
This may be the reason for recent reports that Best Buy would not be falling over itself to buy the ailing Comet chain from KESA after all, why would Carphone Warehouse and or Best Buy invest a load of cash into a marketplace that at best is stagnant but, according to most all recent reports, appears to be in decline with little end in site for the bad news from electricals retailers. It also explains why any expansion plans for the Best Buy name in the UK are now being toned down quite considerably from the rhetoric of a few years ago.
With dire warnings and predictions from Comet, Dixons Retail and Argos all saying sales are down and most issuing profit warnings it will hardly encourage investors to open their wallets to snap up an ailing retailer, unless it’s too good a bargain to resist. Or, alternatively, just let the competition go bust and they’re taken out the market at no cost.
On a more positive note, the group’s French joint venture with Virgin, Virgin Mobile France, moved into profit, with a headline net income of £8.2m versus a loss of £8.2m the year before, and the group’s share of Best Buy Mobile US profits more than doubled from £46.4m to £97.9m.