Carphone Warehouse sales driven lower by weak pre-pay demand

Carphone Warehouse, Europe's biggest independent mobile phone retailer, said continued weakness in the lower value pre-pay mobile phone market hit sales in the fourth quarter, driving like-for-like revenue 5.5% lower.

But the London-listed company said on Wednesday it would meet forecasts for 2011-12 earnings as customers sign up for more profitable long-term mobile phone contracts and buy "non-cellular" products such as tablets, offsetting weakness in the low-margin pre-pay segment.

"We expect to deliver full year profits for CPW Europe in line with guidance, despite the market shift from 18 to 24 month contracts, a material decline in the prepay market and a tough consumer environment," said Roger Taylor, chief executive of Carphone Warehouse.

The company said in November that full year operating profit would be at the lower end of a £135 million to £150 million forecast - effectively flat compared to the previous year.

The firm said on Wednesday sales at CPW Europe stores open over a year fell 5.5% in the three months to end-March, with connections down 19%.

That compared with analysts' average forecast for a like-for-like sales fall of 5%, according to a company poll, and a third quarter decline of 4.7%.

"We estimate that the overall prepay market in Q4 was down 30-40% in the UK, similar to Q3, driven by a lack of attractively-priced smartphone products in this segment, and a weak consumer environment," the company said in a statement.

Carphone's Virgin Mobile France joint venture posted a 21% rise in revenue, also reflecting growth in the postpay market.

"Faced with increased levels of competition in the French market since early January, the business proved to be resilient," the company said.

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.

Shares in Carphone, which have lost nearly a third of their value over the last year, closed last night at 132p, valuing the business at £625 million.