Carphone boosted by Best Buy tie-up

Carphone boosted by Best Buy tie-up

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Carphone Warehouse raised its full-year earnings guidance

Carphone Warehouse has offset slower growth in its European mobile phone arm thanks to its partnership with American electronics giant Best Buy.

The UK retailer lifted its full-year earnings guidance due to expectations that a profit-sharing agreement with Best Buy’s mobile phone retailing operation in the US will now generate up to £100 million for the company.

It said its core European operation performed well in the Christmas quarter, although like-for-like sales growth slowed to 0.7% from 2.4% in November.

Carphone added that connections were down 7.1% due to the continued modest take-up of prepay smartphones and as tough conditions in a number of continental markets offset strong trading in the UK, where like-for-like sales rose 2.3%.

The mobile phone retail business is now part of Best Buy Europe, which is a 50-50 joint venture with Best Buy and also features the recently-launched Big Box consumer electronics stores. Carphone said the performance of its first six Big Box stores reaffirmed its belief in the “substantial opportunity” that exists within the sector.

The megastores have thrown down the gauntlet to rivals such as Currys owner DSG International and Comet firm Kesa Electricals by offering American style service and initiatives such as a trade-in service.

The online offering, branded Best Buy, launched before Christmas and has seen a strong performance to date, according to the company.

Carphone’s shares rose 2% in early trading on Tuesday as the group said it expected earnings per share for the financial year to the end of March to be at the top end of the previously announced range. It is the second time in three months that Carphone has raised its results guidance due to the strength of Best Buy Mobile US, the mobile phone retailing operation in the US.

With connections in the third quarter of the financial year up 33% to 2.2 million, Carphone said Best Buy Europe’s profit share from Best Buy Mobile was now between £90 million and £100 million, compared with the previous estimate of between £85 million and £95 million.

Carphone sold half of its retail business to Best Buy for £1.1 billion in 2008 before demerging its TalkTalk broadband arm last year.

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