May 29, 2018 / 6:19 AM / 2 years ago

Dixons Carphone profit to be hit by shopping shake-up

LONDON (Reuters) - Dixons Carphone (DC.L) warned on profits and said it would have to close shops on Tuesday, wiping more than 500 million pounds off the value of Britain’s biggest electricals chain in the latest blow to traditional retailers.

Online shopping and cash-strapped consumers are taking a toll on firms like Dixons Carphone, which sells a range of electrical goods from iPhones to hoovers at 1,100 Currys PC World and Carphone Warehouse stores, forcing rapid cuts.

“Though there’s plenty to fix, it’s all fixable,” Chief Executive Alex Baldock, who joined Dixons Carphone two months ago from online retailer Shop Direct, said after the results, which some described as “kitchen-sinking” by the new CEO.

Baldock said he will close 92 Carphone Warehouse mobile phone stores this year, and added that the group as a whole was suffering as a result of previous under-investment and rising staff costs. Analysts said more store closures could follow.

Dixons Carphone joins Marks & Spencer (MKS.L), New Look, Mothercare (MTC.L), Carpetright (CPRC.L) and House of Fraser in shutting stores, although it said no jobs would be lost as staff would be redeployed to its other shops.

Shares in the group were down 20 percent to 185.9 pence at 1015 GMT, despite the new CEO pledging to improve margins and better integrate Dixons with Carphone Warehouse, which merged in 2014, and saying that he will flesh out his plans in December.


The retailer said it expected the UK electricals market to shrink this year, with people spending less on computers and more on less-profitable white goods such as washing machines.

Customers are also upgrading mobile phones less often and turning away from long-term contracts, which Hargreaves Lansdown analyst George Salmon said was pressuring margins, while delivery and installation of white goods was proving a burden.

“These problems aren’t new, but with recent UK economic data starting to look slightly better, investors would’ve hoped last summer’s ugly profit warning wouldn’t be repeated,” Salmon said, referring to a cut to forecasts that caused a 30 percent plunge in its share price last August.

Signs display the logo of Dixons Carphone at the company headquarters in London, Britain August 1, 2017. REUTERS/Neil Hall

Dixons Carphone expects headline pretax profit for 2018/19 to be around 300 million pounds, which is 21 percent below the 382 million pounds it is forecasting for the year to April 28, 2018, and short of analysts’ forecast of 387 million pounds for 2018/19, according to Thomson Reuters data.

The UK market accounts for about 60 percent of Dixons Carphone revenues. The company was more optimistic about its international markets, where it trades in the Nordics, Spain and Greece, saying it expected continued growth in profits.

The fast-changing landscape means that European consumer electronics is seen as ripe for consolidation, with Germany’s Ceconomy (CECG.DE) saying this month it will keep pushing the process to cope with the advance of rivals like Amazon (AMZN.O). Ceconomy’s MediaMarktSaturn has signed a deal with French electronics retailer Fnac Darty (FNAC.PA) to create a European alliance for purchasing and has suggested Dixons Carphone might also be interested in joining.

Reporting by Sarah Young, additional reporting by Emma Thomasson and Paul Sandle; Editing by Mark Potter and Alexander Smith

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