Dixons Carphone ‘looking at store estate’ after profits collapse

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Dixons Carphone has seen half year profits collapse after a difficult mobile phone market hammered the retailer, with the group warning over potential store closures.

Headline pre-tax profit for the 26 weeks to October 28 tumbled 60% to £61 million, while total sales nudged up 3% to £4.87 billion.

The high street chain was dragged down by a 3% fall in comparable sales at its troubled mobile phone division as it pledged to reposition the arm to deliver a “simpler, less capital-intensive business”.

Speaking to analysts, chief executive Seb James said: “We have a high cost base and we need to address that, and we always look at our store estate.”

Shares rose over 4% to 174.2p in morning trading following the update.

Neil Wilson, senior market analyst at ETX Capital, said: “For simpler and less capital intensive, read store closures.

“With over 700 Carphone stores in a total estate in excess of 1,000 across the group, there is ample opportunity to rationalise the Carphone estate and improve profitability in mobile while still retaining a dominant market position.”

However, a  company spokesman insisted that there are currently “no store restructuring plans”.

UK profit fell from £130 million to £34 million in the period and the results come after Dixons Carphone warned in August over a Brexit profit hit as the soaring cost of new mobile phones means people are holding on to older models for longer.

The electricals giant has said the pound’s collapse following the country’s decision to quit the European Union has meant an increase in shop prices for mobile devices and bemoaned “challenging conditions”.

Mr James added: “As we said in August, the UK post-pay mobile phone market is tougher, with a combination of higher handset costs and relatively incremental technology growth continuing to cause customers to hold on to their handsets for longer and some to choose a SIM-only contract in the meantime.

“In addition, the later launch of the iPhone X pushed some sales into the second half of our financial year.

“Throughout the period, we made a very conscious decision to fight hard to drive sales in our product offering, and this has impacted mobile profitability.”

Profits were also hit by a £58 million charge from a change in receivables revaluations and insurance contract terms.

In brighter news, the retailer said that it has had a good start to peak trading ahead of Christmas following a record Black Friday across all geographies.

Dixons Carphone was buoyed by the performance of electricals, where like-for-like sales rose 7% across the group and 6% in the UK.

Mr James also said the firm is considering taking bitcoin payments for its products, but added that it is currently too early to do so.

The firm expects full year profit to come in at between £360 million to £400 million.

George Salmon, equity analyst at Hargreaves Lansdown, said: “With mobile profitability falling, we wouldn’t be surprised to see the group make some major changes in the not-so-distant future, unless of course the iPhone X starts to fly off the shelves.”

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