Carphone Warehouse is aggressively rolling out its Wireless World format of stores by opening more than one per day in the UK in a bid to achieve growth in non-cellular device sales.
Carphone Warehouse Europe CEO Roger Taylor told analysts in a conference call that tablet, accessories, application and content sales would replace prepay revenues, which have been falling sharply. In its third quarter results for the 13 weeks ending 31 December 2011, posted earlier this week, the retailer said the prepay market was ‘very weak’ and down between 35-40% on 2010. Taylor said: ‘The decline in prepay is more extreme in the UK given the competitive nature of the market and level of subsidies.’
In spite of the prepay slump, Taylor said he had noticed smartphones were increasing their share among pay-as-you-go contracts. He said: ‘Smartphones account for around 30% of the overall prepay market. Twelve months ago, this was as little as 10% but I expect there will be a steady progression rather than anything transformational. I don’t expect that in the prepay segment there will be any great shift in the subsidy dynamic in the year ahead.’
Taylor identified non-cellular sales as a key area of potential growth. Sales in this area account for less than 10% of its total revenue, but Carphone said sales of accessories were up 15% year on year. He told analysts that accessory sales accounted for between 40-50% of sales in its Wireless World stores.
He said: ‘They enable us to sell a wider range of products. Tablet sales have increased around five or sixfold on last year. Those products will replace a lot of the lower end prepay revenues… We can sell those in a much smaller retailing environment. You do not need a 30,000 sq ft box to sell what I think is going to be interesting in consumer electronics retailing going forward.’
There are currently 294 Wireless World stores across Europe but the retailer expects this to increase by 375 by the end of March.
Strategy Analytics’ analyst Neil Mawston said: ‘The market for mobile phones is fragmenting in terms of devices and accessories, so Carphone is trying to move as fast as possible [with the Wireless World expansion] to try and keep up.’
Overall, the business had sales of £990m for the quarter to 31 December, a 4.2% drop on 2010 but down 4.7% on a like-for-like basis. The slump in prepay hit connections, which were down 16.6% to 2.91 million for the quarter.
Taylor said: ‘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.’
Carphone Warehouse shares were up 7.73% to 338.0p on Tuesday after the results were released.