Dixons Carphone can rest after tough year
DIXONS Carphone released half-year results on Wednesday.
A strong showing in electricals helped deliver another record Black Friday event for the PC World, Currys and Carphone Warehouse owner. However, this was more than offset by weak mobile sales and store closures.
It was therefore no surprise to see pre-tax profits fall to £61million, sharply down on the equivalent period last year.
However, the group confirmed its intention to leave the interim and final dividends this year unchanged at 3.5p and 7.75p respectively. This was well-received news, leading the shares up on the morning of the results.
Nonetheless, they remain well below 2015 highs. The trend downwards has been driven by a few factors, not least a slower mobile market. Dixons says customers are holding on to handsets for longer.
Even after sacrificing profits by lowering prices, it seems the improvements from one model to the next aren’t generating the same scramble to the tills they used to. We can expect a few changes to this part of the business in the coming months.
There are a few over-arching concerns, too. The drop in sterling may be boosting the value of overseas sales, but this positive is more than outweighed by the higher cost of importing goods to the UK, which remains Dixons’ main market.
With inflation outstripping salary increases and economic uncertainty abound, it seems customers are thinking twice before splashing out.
The rise of the online specialist is impacting the group, too. Amazon et al aren’t burdened with the costs of running a physical store, and this can often translate to an ability to offer lower prices.
This trend has already put paid to many of the group’s former rivals. The concern
is that Dixons goes the same way. However, being the last man standing comes with advantages. There are still plenty of shoppers who like to pay a touch more to get some friendly advice.
The 5.6 per cent dividend yield is an attraction, but the current challenges mean there are question marks over whether the dividend can be maintained.
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