AO WORLD PLC 
LONDON (Reuters) - Dixons Carphone (>> Dixons Carphone PLC), the European electrical goods and mobile phone retailer formed from a merger last year, reported a strong rise in sales on Wednesday and said it expects to report better than previously forecast profits as the firm wins market share from rivals.
Though investors initially reacted coolly to the plan to merge Dixons Retail and Carphone Warehouse they were quickly won over and the merged group's share price has risen by 50 percent since the deal was completed 10 months ago.
"It is clear now that one of the main reasons AO.com is finding UK trading 'challenging' is because their great rival Dixons Carphone is hoovering up market share," said independent retail analyst Nick Bubb.
On Tuesday online home appliance retailer AO World (>> AO World PLC) had cautioned that it was finding the UK trading environment tough, while department stores and online retailer John Lewis [JLP.UL] has consistently reported weak electricals sales this year.
In contrast Dixons Carphone said sales at stores open over a year in its UK & Ireland division rose 13 percent in the 17 weeks to May 2, beating analysts' consensus forecast of a rise of 5 percent.
"We were a bit surprised by some of the numbers that have been shown by some of our competitors," Finance Director Humphrey Singer told reporters.
"We clearly have gained share. I think the market’s been OK as well. The UK has shown signs of some macro economic recovery and I guess we’ve benefited from that."
Singer said Dixons Carphone was benefiting from cheaper prices and from customer service initiatives such as free warranties and improved free delivery options.
He said the firm was also "taking more than our fair share of Phones4U customers", a reference to the mobile phone retailer that collapsed into administration last September, and was also benefiting from growing demand for smart technology.
Singer did, however, caution that comparative sales figures would be much tougher in the first quarter of the 2015-16 year as trading in the period last year was boosted by the football World Cup.
After an initial rise shares in the firm were down 1 percent at 474 pence by 1046 BST on Wednesday, still up 49 percent on a year ago and valuing the business at 5.4 billion pounds.
Dixons Carphone's like-for-like sales were up 1 percent in the Nordics and up 8 percent in southern Europe.
Group like-for-like sales rose 9 percent, well ahead of an analysts' consensus of a rise of 4 percent.
With gross margins stable the firm is now forecasting an underlying pretax profit for the year ended in March to come in at above the top end of the previous forecast range of 355-375 million pounds.
Year-end net debt was forecast to be lower than its previous forecast of 300 million pounds.
($1 = 0.6510 pounds)
(Editing by Kate Holton and Greg Mahlich)
By James Davey
