Yahoo Finance Dixons Carphone profits fall 24% amid warning of no quick fix
The new Dixons Carphone boss, Alex Baldock, has underlined his warning that fixing the retailer’s problems will take time, as he reported a 24% plunge in profits.
The UK electricals and mobile phone retailer, which disclosed a huge data breach last week, has been hit by the lack of technical innovation in mobile phones, meaning customers are updating their handsets less frequently. Many are also switching to cheaper sim-only deals.
Dixons made an underlying pre-tax profit of £382m for the year to 28 April, down from £500m the previous year. It had already flagged the fall last month, along with the warning that current-year profits will slide by a further 20%.
Like-for-like revenues in the UK and Ireland rose 2%, while group like-for-like revenues were up 4%, boosted by strong growth in Scandinavia and Greece. UK mobile phone sales were flat on a like-for-like basis.
Baldock, who took over as chief executive from Seb James in April, said: “Recent events have underlined that we have plenty of work to do, and it will take time, but I’m even more confident than the day I took the job in our long-term prospects.”
Dixons is closing 92 Carphone Warehouse stores this year as it adapts to a changing mobile phone market and rising costs. It has blamed the fall in the value of the pound in the wake of Brexit for driving up the cost of mobile phone handsets.
The group said there was no update on its recent data breach, one of the biggest to occur in Britain, involving unauthorised access to 5.9 million Dixons customers’ cards and to 1.2m personal records of customers. A branch of GCHQ, Britain’s intelligence and security service, is investigating the attack alongside the retailer and other agencies.
Patrick O’Brien, the UK retail research director at Global Data, said of the store closures: “How much of those sales can be retained through its other stores and online channel will be pivotal in deciding what to do with the remainder. With EE, O2 and Vodafone on every high street, retaining sales will be difficult.
“In the coming months, Baldock has the tricky contract renegotiations with those carriers to deal with. He believes that its capital intensive model needs to change and that the profitability of those contracts needs to improve. However, mobile contracts sold through third parties are the least profitable for the networks and there is even the possibility of one or more pulling out of Carphone Warehouse entirely. Vodafone did exactly this in 2006.”
