Best Buy , the world's No.1 electricals retailer, will do whatever it takes to succeed in the UK, joint venture partner Carphone Warehouse said as it raised profit forecasts for the third time in six months.
Carphone, Europe's biggest independent mobile phone retailer, said on Monday it was benefiting from surging demand for smartphones like Apple's iPhone and strong sales at the venture's Best Buy Mobile business in the United States.
The venture, called Best Buy Europe, is unveiling the first of a long-awaited chain of megastores in Britain on Monday that will take on market leader DSG International , which owns the Currys and PC World chains.
The launch, originally planned for last summer, was delayed by the recession, giving time for DSG to develop its own chain of megastores, often close to the sites acquired by Best Buy Europe, and raising speculation of a price war.
We're here to make it work. We will make it work, whatever that takes, Carphone Chief Executive Roger Taylor told Reuters in a telephone interview, when asked if Best Buy had the stomach for a fight.
Carphone said the venture would invest 70-80 million pounds in the so-called big box megastores in 2010-11, including about 35-40 million of capital spending and larger-than-expected operating losses of about 40-45 million.
The surprisingly big loss guidance ... implies Best Buy are prepared to swallow a lot to get the big boxes established, said Arden Partners analyst Nick Bubb.
Carphone, which demerged telecoms arm TalkTalk last month, said underlying earnings per share for the year ended March would be 8.0-8.4 pence, up from 4 pence the year before.
Like-for-like revenues at the group's European business were up 3 percent at constant currencies in the final quarter, boosted by demand for a range of smartphones as firms like Research In Motion , Samsung <005930.KS> and Nokia seek to challenge the iPhone.
A BIG CHANGE
We're really at the start of a big change in the cycle of the marketplace where all consumers now feel that a mobile phone really is genuinely more than just sending texts and making calls, Chairman Charles Dunstone told analysts.
Taylor said almost 50 percent of all handsets sold by Carphone in the UK were smartphones and forecast that proportion would rise to around two thirds in 2010-11.
Carphone also said connections at the venture's Best Buy Mobile business in the United States leapt 34 percent in the fourth quarter and that this business was likely to power growth in 2010-11, despite a difficult economic backdrop.
By 5:30 a.m. ET, Carphone shares were up 2.6 percent at 199.75 pence.
The macro environment will undoubtedly present challenges but we are well positioned in each of our businesses and we are targeting 40 to 45 percent EPS (earnings per share) growth for our 2011 financial year, Dunstone said.
Credit Suisse analysts said the guidance, at its midpoint, implied a 6 percent increase to their 2010-11 EPS forecast of 11.1 pence.
Taylor said the venture would open eight to nine megastores this year, and that plans for next year would depend on their performance, as well as the success of an online business that will be launched in the autumn.
The advantage of the megastores over incumbent operators included nine weeks of upfront training for all Best Buy blue shirts staff, and a commitment to set up and personalize all laptops, cameras and mobile phones for shoppers so they are ready to use when they leave the store, he said.
(Editing by Sharon Lindores and Rupert Winchester)