Carphone Warehouse Europe will hit its full-year targets despite a fall in like-for-like sales of 4.7%, the company has said.
In the 13 weeks to 31 December 2011, sales were £990m, down 4.2% on a total basis on the same period in 2010. It made 2.91 million connections during the quarter, down 16.6% on 2010. Carphone blamed this on a 'very weak' prepay market, which it said was down between 35% and 40% on 2010. It said: 'This was driven by a reduction in subsidies from the networks in low-end prepay, a lack of smartphone product in this segment, and a weak consumer environment.'
However, it said postpay remains a key profit driver for the business. It added: 'We are therefore confident of achieving full-year headline earnings within guidance.'
The retailer said it would push further into non-cellular devices like tablets, accessories, applications and content. Sales in this area account for less than 10% of total revenue but Carphone said revenue of these products increased by 15% year on year.
It said it is continuing its 'aggressive' rollout of its Wireless World store formats. It had 294 of these shops across Europe by the end of the third quarter. It is predicting this will increase to 375 by the end of March.
The retailer said it had closed all 11 of its UK Best Buy stores. It said the cost of the closure would be between £105m and £120m, which is in line with what it said when it announced the closure of the branches in November.
Looking ahead, the business said it expected 'less favourable prepay dynamics to remain' but added they would be offset by the increase in non-cellular sales.
Carphone Warehouse Europe CEO Roger Taylor said: 'CPW Europe has performed strongly on postpay sales and is now benefiting from the improved profitability of its new postpay commercial terms. In addition, we achieved 15% growth in our non-cellular revenues, with the sale of tablets and other devices accelerating. As expected, the prepay segment remains weak, with a significant decline in low-end prepay sales year on year.
'We remain well-placed to benefit from continued consumer enthusiasm for connected technology, and as such we are accelerating the rollout of our Wireless World stores to meet this demand and deliver a strong service proposition that complements this segment of the consumer electronics market.
'In Virgin Mobile France we also continued to perform strongly in postpay, driving year on year revenue growth of 15%. The business is about to start operating as a full virtual network operator, transitioning its customers to its own SIM cards over the next 18 to 24 months.
'As with all retailers, we face a tough consumer backdrop, but our customers value our proposition and we are capitalising on the strong product cycle in smartphones and non-cellular categories, where we continue to broaden our range. With confidence in our future, we are reiterating our guidance for this year's headline earnings.'