Carphone Warehouse, Europe's biggest independent mobile phone retailer, said it was planning a big push into other electronic gadgets, such as laptops and tablets, as it seeks to replace falling revenue from a weak prepay phone market.
Having last year scrapped plans for a European chain of consumer electronics megastores through its joint venture with top U.S. firm Best Buy Co, Carphone now plans to use existing stores to offer extended ranges of tablets, laptops, Kindles, accessories, applications and content.
We can sell those in a much smaller retailing environment. You do not need a 30,000 square feet box to sell what I think is going to be interesting in consumer electronics retailing going forward, chief executive Roger Taylor told Reuters on Tuesday.
If I look at our stores going into Christmas, we did a very good job in postpay (mobile phones), we did a reasonable job in tablets but the rest of the store environment we have still got to get smarter in how we retail other products, he said.
Taylor noted that non-cellular revenue grew 15 percent year-on-year in the three months to December 31, Carphone's financial third quarter, but represented less than 10 percent of total revenue.
The CEO believes Carphone can differentiate itself in these additional product areas, even though he faces stiff competition from Europe's top three electricals retailers - Metro owned MediaMarkt-Saturn, Dixons and Kesa - as well as a weak consumer environment.
Many European retailers are struggling as shoppers are squeezed by rising prices, subdued wages growth and government austerity measures and worry about the eurozone debt crisis.
WEAK PREPAY MARKET
Shares in Carphone rose 2.4 percent after the firm said it would meet forecasts for year to end-March 2012 earnings, despite third-quarter sales at CPW Europe falling just shy of analyst expectations.
Sales at CPW Europe stores open over a year fell 4.7 percent, with connections down 16.6 percent. That compared with a forecast for a fall of 4.2 percent, according to a company poll, and a first-half decline of 3.9 percent.
The outcome reflected growth in postpay connections, driven by new smartphone products, like Apple's iPhone 4S, being more than offset by a prepay market down 35-40 percent in the UK, driven by a reduction in subsidies from the networks, a lack of smartphone product in this segment and low consumer confidence.
There is probably 40-50 million pounds of revenue coming out of that prepay segment, which we are not going to directly replace, said Taylor, pointing out that postpay remains the key profit driver.
Carphone's Virgin Mobile France venture posted revenue growth of 15.3 percent to 109 million euros, ahead of a forecast rise of 10 percent.
Carphone Warehouse shares, which have lost 17 percent of their value over the last year, were up 3.3 percent at 1039 GMT, valuing the business at around 1.5 billion pounds.
CPW Europe offers growth via the accelerated roll out of the smartphone, tablet, accessory and service format 'Wireless World' (stores) together with the benefit from new network terms, said analysts at Citi.
(Reporting by James Davey; Editing by Paul Sandle and Erica Billingham)