Dixons pressing right buttons, but static looms down the line
Comment Martin Flanagan
Dixons Carphone, the electricals giant created by the merger of Dixons and Carphone Warehouse in 2014, is counting its technology-driven blessings, but taking nothing for granted. So the group unveiled creditable halftime same-floorspace sales in the UK and Ireland, and also in the Nordic countries, as well as a near-20 per cent jump in profits, but the shares took a hit because city analysts homed in on chief executive Seb James’s admission that the company was braced for “more uncertain times”.
Investor disquiet is easy to understand, and not just because of the 30 per cent slide in the shares so far this year. Dixons Carphone is a major play on consumer confidence and there are widespread fears that with a predicted economic downturn next year following last June’s Brexit vote that could be undermined.
It could also see gathering supplier cost pressures following the slide in the value of the pound following that Brexit vote. In short, investors can see everything is pretty much hunky-dory at the minute for the business, but fear it could be squeezed between its customer and supplier bases next year.
James was pressing the right buttons yesterday in saying Dixons Carphone’s huge size gave it good negotiating traction with “collaborative” suppliers, and that he would also minimise the impact of the pound’s tumble on customers.
But it could be difficult to square the circle and hence the investor feeling that, for the immediate future, the company could face pressures which take some of the lustre off its impressive performance since the merger of the two groups. Dutch brewing giant Heineken has made great play in recent years of expanding its brewing arm in faster-growing emerging markets. But its somewhat left-field takeover proposal for about 1,940 of Punch Taverns’ UK pub estate, with a private equity partner potentially taking the other 1,330 or so, looks more a move to protect profitability in the mature UK market (about 6 per cent of group earnings).
Heineken already has about 1,100 UK bars, so such a deal would nearly treble the size of the shop window for its brands, a central tenet of the business when it was owned by the old Scottish & Newcastle Breweries.