Big changes ahead at Dixons as profits fall
DIXONS Carphone is ringing the changes at its smartphone business after a slump in profits as customers hold on to their older handsets for longer.
The FTSE 250 electricals and mobile phone retailer, which trades as Carphone Warehouse, PC World and Currys in the UK, was hit by the delayed launch of the iPhone X as its like-for-like mobile sales reversed 3 per cent in the first half. Its UK electricals sales jumped 6 per cent.
It had already flagged the issues of a weaker pound driving up the cost of mobiles and a lack of innovative features in new models in a profit warning in August which sent its shares crashing by more than 20 per cent.
Half-year pre-tax profit was down 60 per cent to £61million on 3 per cent higher revenue of £4.87billion and it now expects annual profit of £360-400million. Its previous upper limit guidance was £440million.
But shares rebounded 14p to 181½p on hopes that a mobile shake-up would improve its finances and as chief executive, Seb James, said Black Friday had been a “cracker” for the group, generating nearly £500million worth of sales over the period.
James said: “A combination of higher handset costs and relatively incremental technology is continuing to cause customers to hold on to their handsets for longer. We have made a very conscious decision to fight hard to drive sales, and this has impacted mobile profitability. Vitally, though, these actions have helped maintain scale, reinforce our position as market leader and ensure our relevance to the customer.
“We recognise the performance of the mobile division needs addressing, and are taking action to adapt our model to cement our place in a changing world. We believe we can reduce the complexity and capital intensity of our mobile business model and increase the simplicity and profitability of what we do.”
The company, which will “update the market in due course”, is looking to overhaul the way handset sales are financed and could bring in a third party to foot some of the costs but insisted that it had “not signalled a store closure programme”.