Carphone WarehouseCarphone Warehouse has became the latest retailer to benefit from the boom in demand for tablet computers and smartphones as it posted a 16% leap in UK sales.

But the group admitted the hike had come at the expense of profit margins after launching a raft of cut price deals and bundle offers in the quarter to December 31.

Shopping with AOL

Investing


It trimmed the top end of its earnings guidance, forecasting between £135 million to £145 million from £130 million to £150 million previously, as it now expects margins to be around 2% lower over the full year.

The group, which has more than 2,400 stores in its European joint venture with US group Best Buy, said it was following a "clear strategy" to drive sales higher. Carphone notched up an 8% share of the tablet market during peak trading and said non-mobile phone sales accounted for around 9% of all retail revenues in the quarter.

A raft of retailers were boosted over Christmas by soaring demand for tablets, with PC World and Currys parent Dixons Retail reporting a bigger-than-expected 8% jump in UK and Ireland sales due largely to "phenomenal" sales of the computers.

Catalogue chain Argos also thanked tablet sales for a 2.7% rise in festive sales. Roger Taylor, chief executive of Carphone Warehouse Group, said he was "delighted" with the performance. "This reflects extremely well on our team and on our policy of investing in our proposition to give our customers compelling offers on smartphones and tablets, accepting some margin investment," he added.

The UK performance offset weaker trading in its European stores, which held sales broadly flat in the quarter after "particularly tough" trading in France, leaving overall like-for-like sales up 7.8% across the CPW Europe division.

Customer connections lifted 3.9% to 2.9 million, despite a fall in mainland Europe. Carphone Warehouse said it had also continued to see some improvements in the pre-pay mobile phone market as it benefits from the availability of more affordable smartphones, such as the Samsung Galaxy Y, LG Optimus L3 and Samsung Galaxy Ace.

But the number of pre-pay customers remained substantially lower, down 37.1% to 401,000. The figures also showed Carphone's Virgin Mobile France joint-venture lost out amid aggressive competition from rivals over Christmas, with a drop of 17,000 mobile phone customers on contracts in the quarter.

Nick Bubb, independent retail analyst, said the CPW Europe sales result was "pleasing" and far better than the 3% to 4% rise expected in the market.

The Motley Fool is an AOL Partner