Yahoo Finance Dixons Carphone rocked by slump in phone sales
Shares in Dixons Carphone plunged by as much as 30% earlier as it stunned the City with a shock warning of a slump in sales.
The electricals retailer warned shoppers are holding on to their phones for longer, exacerbating fears of a wider consumer squeeze.
Dixons said pre-tax profits would come in at £360 million to £440 million this year, down from £501 million last year.
The shares rapidly tanked 52.25p, or 23%, to 175.3p.
Seb James, chief executive, said squeezed consumers are holding on to their phones for an average of five months longer than usual. He said consumers delaying buying was “quite rational given the increasing cost of handsets and the relatively incremental technical improvements”.
The retailer, which enjoyed record profits last year, said the pound’s post-Brexit vote weakness meant handsets have become more expensive.
It insisted customers would return to upgrading soon, with the hotly anticipated launch of Apple’s iPhone 8, superseding the unpopular iPhone 7, next month. Samsung launched its Galaxy Note8 yesterday.
However, James added: “We are not betting the farm on iPhone 8. Phones last two to three years before they begin to degrade. When people are using a phone where the battery only lasts half a day, they will upgrade.”
Industry sources said trends that had been occurring for several years appeared to be catching up with Dixons. Price-conscious customers have been switching to SIM-only deals, which allow them to keep old phones and drastically reduce their bills. At the same time, mobile operators have increased their retail presence.
Some of the biggest losers from the share price dive included Carphone Warehouse founders Sir Charles Dunstone, who owns 11%, and David Ross, who has nearly 5%.
Dunstone stepped down as Dixons chairman in May to return to TalkTalk as executive chairman. The dive caught investors by surprise. There have been no recent major short positions against the stock.
The retailer also said the scrapping of EU roaming charges, since June, would lead to phone users’ spending less and could result in a £10 million-to-£40 million hit to profits.
Analysts at UBS said there was investor scepticism about the quality of Dixons’ earnings “made worse by short-term UK consumer concerns”.
Neil Wilson, analyst at ETX Capital, said: “Brexit matters here. The weak pound exchange rate has made devices more expensive and consumers are less willing to replace old handsets so quickly.”
