Carphone is splurging more money than City analysts had expected on its new ‘big box’ stores, the first of which was recently unveiled.
It’s a clear signal that the company is preparing for a fierce battle with market leader DSG International, the company behind Currys and PC World.
Carphone has said its Best Buy joint venture will invest £70-£80 million in the new megastores in 2010-11.
That includes about £35-£40 million of capital spending and deeper-than-expected operating losses of about £40-£45 million pounds.
“The surprisingly big loss guidance implies Best Buy is prepared to swallow a lot to get the big boxes established,” said Nick Bubb, veteran retail analyst at Arden Partners.
Best Buy aims to open eight to nine megastores this year and launch an online business in the autumn.
Carphone was forced to delay the launch for almost a year because of the global financial crisis.
That allowed DSG to drum up its plans for its own chain of megastores, many of them cheekily near to Best Buy Europe’s new sites.
If it all sounds a bit like Store Wars, then listen to Carphone’s new chief executive Roger Taylor last week, when asked by Reuters if Best Buy had the stomach for a fight: “We’re here to make it work,” he declared. “We will make it work, whatever that takes.”
According to Talyor, Best Buy’s ‘blue shirts’ staff will get nine (count ‘em) weeks training and will have to set up and personalise all laptops, cameras and mobile phones for shoppers so they are ready to use when they leave the store.
The megastores are Taylor’s first big test since he stepped from behind the calculator to become chief executive after Charles Dunstone moved upstairs to chairman in the wake of the demerger of TalkTalk.
Industry watchers Enders Analysis are sceptical that the company can make the new stores work financially, however.
“The company has a strong management team backed up by the experience of the very successful Best Buy US team, but it is attacking the competitive UK consumer electronics industry, with an approach that does not appear to be very differentiated from the direction that the incumbents have been heading in for the past year or two.
“The project’s long term profitability is therefore far from assured,” wrote analyst James Barford.
Full article in Mobile News issue 463 (May 10, 2010).
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