Best Buy not such a great deal for Carphone Warehouse

Best Buy UK's full-year losses jumped from £21m to a whopping £62.2m. Will Carphone Warehouse live to regret nailing its colours to this particular mast?

by Dave Waller
Last Updated: 06 Nov 2012
Losses were even worse than the £50m to £55m Carphone Warehouse had forecast for the chain, of which it owns 50% as part of a joint-venture with the US electronics giant. Given that it’s now over a year since Charles Dunstone’s group embarked on its programme of opening 10 ‘big box’ megastores across the UK, it’s perhaps no surprise that all those concerned are sitting down for a rethink.

‘We’re still trying to work out exactly what is the right format for selling consumer electronics within the UK’, Dunstone said. OK, so it’s a tough time to be opening any new retail concept, but clearly it has proved harder than expected – the model that worked in the US just hasn’t been as successful over here. That’s partly because of high set-up costs, and partly because the market is so competitive; indeed, now that so many of us buy our consumer electronics online, it does seem rather an odd time to be banking on the big box.

Which is a shame, because elsewhere Carphone Warehouse is doing pretty well. It’s the UK’s biggest mobile phone retailer by turnover, and for Carphone Warehouse Europe, which operates more than 1,700 stores, earnings before interest and tax rose by 18% to £134.6m. The group attributed that to the growing popularity of smartphones, such as the iPhone 4. Meanwhile in the US, its share of Best Buy Mobile US’s profits more than doubled to £97.9m; the mobile operator now has a 5% share of the US market, up from 1% in 2006. Carphone also owns a 47.5% stake in Virgin Mobile France – where last year’s loss of £22.2m was transformed into a profit of £20.6m through ‘creative marketing campaigns’.

Now, if only Dunstone can get creative and work out how to make some money out of those big boxes…

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