Business Watch: Carphone outruns expectations

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Carphone Warehouse posts sales increase, lower connections, but City applauds its debut as standalone business

Carphone Warehouse shares surged to their highest level since its March demerger from TalkTalk on Wednesday (July 28) morning after it published its maiden first quarter figures as a standlone company.

It’s been an impressive start by the business, which beat analysts revenue forecasts helped by surging demand for smartphones.

It also reported a successful launch to its ‘Big Box’ venture with America’s Best Buy.

Same store sales rose 3.7 per cent in Carphone’s main European business in the 13 weeks to July 3, a percentage increase almost double that of analysts’ average forecast of just two per cent.

The rise came despite a fall in connections, which were down “as anticipated” by 1.1 per cent due to a reduction in sales of lower value prepay phones.

Chief executive Roger Taylor (pictured) said it had been a “good start” to the financial year and the firm was “delighted with the launch of the first three Big Box stores in the UK branded Best Buy.”

Taylor says the customer response has been “extremely positive” at the stores in Thurrock, Hedge End and Merry Hill.

He expects to open a further three stores later this year and reveal details of the 2011 opening programme in due course.

He was also pleased with the performance of the ‘Wireless World’ stores saying Carphone remains on course to have 100 across its footprint by March 2011.

He was also upbeat that connections at the Best Buy Mobile US business jumped 29.7 percent to 1.43 million, beating the company’s full-year guidance for growth of 15-20 percent.

Investors love companies that set expectations and then beat them; and they hate companies that overpromise and under-deliver.

On that measure, Taylor – who was a past-master of expectation management in his previous role as Carphone’s former finance director – has earned an ‘A’ grade first term report card from the City.

At the time of writing, shares in the company were trading up 12p to 228p, well above the 138p they closed at on the first day of trading in March.

And Taylor continues to manage expectations, warning that he remains cautious about the economic environment but adding that Carphone is confident of achieving the full-year guidance it set out in April.

Before then investors will want a bit more detail about the actual performance of those Big Box stores.

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