Carphone Warehouse confirms Best Buy’s European expansion

14 Oct 2008

Carphone Warehouse said that the launch of Best Buy, the giant US electronics brand, into Europe will see it more than double revenues by 2013.

As reported on last week, Carphone Warehouse is to embark on a massive store rollout across Europe, with the first large-format store set to open in 2009.

Earlier this year Best Buy, which has a 22pc share of the US computing market, paid US$2.5bn for a 50pc stake in Carphone Warehouse.

Best Buy Europe, the new name for the venture that incorporates all of Carphone Warehouse’s existing retail operations, will incur start-up costs of up to £20m sterling in the current financial year and up to £30m sterling in the year to March 2010, with capex (capital expenditure) in that year of up to £40m.

“Our goal is to double revenues and operating profit for Best Buy Europe between the March 2008 year and the March 2013 year, assuming reasonable economic conditions,” said Carphone Warehouse CEO, Charles Dunstone.

“We expect the rollout of the Best Buy-branded stores and alternate channels to generate a post-tax return on investment capital percentage in the mid-teens.”

In the UK, Carphone Warehouse reported total connections were up 9pc to 3.1 million, while broadband subscribers stood at 106,000 unbundled, bringing the total of broadband subscribers to two million.

Dunstone said he believed Europe is a highly attractive market for consumer electronics retailing.

“Market growth is forecast to be strong, but the customer experience is often poor and we intend to introduce a differentiated proposition with a strong emphasis on service.

“In addition, we will focus primarily on larger stores of 30,000 sq ft or more, where the overall economics are typically more attractive than for smaller stores. Our first stores will open in the UK next year, supported by an integrated multi-channel offering allowing customers to interact with us however they choose.”

Dunstone said that the immediate consumer outlook remains very uncertain.

“However, in the retail business, we have secured our best-ever Christmas line-up and will work hard to increase our share of customer spending. In telecoms, we are well positioned as a value player with a highly efficient network, providing good visibility of cash flows in the coming years.

“Our robust balance sheet and the quality of our assets leave us well placed to ride out the downturn and emerge in an even stronger position on the other side,” Dunstone said.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years