Charles Dunstone saw almost £100 million wiped from the value of his fortune last week as stockmarkets went into free fall.
So no pressure on Dunstone (pictured) this week then, as the Carphone chief executive tried to persuade battle-hardened investors and analysts that launching an expensive electrical goods venture in a recession is a great idea.
But there’s nothing like a bit of free foreign travel to soften the cynics – so Carphone flew the City scribblers to Chicago to unveil the details of its joint venture with US firm Best Buy.
You may remember Carphone sold half its retail business to Best Buy for £1.1 billion earlier this year as part of a plan to join forces and expand across Europe, with a new larger store format.
Carphone set out some seriously ambitious growth plans for the venture, which will take on Britain’s DSG and Kesa in Europe’s €165 billion per year (£128bn) electrical goods market.
Dunstone’s targets are much braver than most analysts expected: for instance, he plans to double Carphone’s existing retail sales and earnings in five years.
Given Carphone reported underlying earnings of £175 million for the year ended March 2008 on revenues of £3.12 billion, that implies the venture is aiming for earnings of some £350 million by March 2013.
“The guidance is ambitious, in our view, and ahead of forecasts,” wrote analysts JP Morgan in a research note.
They also noted with caution Carphone had highlighted a “very uncertain economic outlook” and said full-year profit forecasts are likely to fall around 15 per cent.
Carphone’s chief financial officer Roger Taylor, also head of the Best Buy Europe venture, had a counter-intuitive view.
He admitted, “the general consumer environment is tough”, but told Reuters that would work to its advantage, as it made store sites cheaper and made it harder for rivals to step up their game.
“I don’t think there could be a better time to do it,” he claimed.
Full article only in Mobile News issue 425 (October 20, 2008).
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