Dixons warns on profits as mobile sales lose charge
DIXONS Carphone shares plunged by as much as 30pc after the retailer became the latest FTSE 100 company to deliver a shock profit warning, saying that customers were holding on to their mobile phones for longer.
The company, which now trades as Currys, PC World and Carphone Warehouse, was punished by investors after announcing it expected full-year profits to fall to between £360m and £440m, compared to the £501m record profits it reported in April.
Retail analyst Nick Bubb said the profit warning would “go down like a lead balloon in the City” and shares in the company closed down 54.5p, or 23pc, to 180.8p.
Dixons Carphone’s announcement came after chief executive Seb James said the weakness of sterling since the Brexit vote had made mobile phone handsets 16pc more expensive while “technical innovation has been more incremental”.
He said: “As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural life cycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year.”
Mr James said that people were holding on to their phones for between four
to six months longer and replacing them after 29 months rather than 24.
Dixons Carphone also spooked investors by warning that it will face a £10m to £40m hit this year, compared to a one-off £71m boost last year, as a result of changes in EU roaming laws.
It typically gets a slice of mobile phone operators’ revenues for every connected mobile phone they sell for the lifetime of a contract.
Dixons Carphone makes assumptions about how much it will make from its mobile phone contracts and takes the revenues up front. But with mobile phone operators making less money as a result of cheaper calls and texts for customers travelling across Europe, Dixons Carphone will also be receiving less than it had predicted.