Dixons Carphone profits down, outlook down, shares down 20%

The UK’s largest electricals retailer Dixons Carphone saw its share price plunge after its profits declined significantly and it warned they would continue to do so.

Dixons Carphone managed a like-for-like increase in revenues of 4% in the 2017/18 financial year but despite that saw its profits-before-tax plunge by 24% to £382. Furthermore the company warned that profits are expected to fall another 27% to £300 million in the next financial year. This outlook will have been what caused a sell-off of Dixons Carphone sales such that they were down 20% at time of writing.

“Eight weeks in the business have cemented my optimism about Dixons Carphone’s long-term prospects,” said Alex Baldock, who recently took over as Group Chief Executive after the last guy went off to run the Boots pharmacy chain. “I’ve found exceptional strengths, and though there’s plenty to fix, it’s all fixable.

“We’re number one in each of our markets, with people and capability no competitor can match. Our opportunity lies in making the most of those strengths, which we are nowhere near doing. And we must: nobody is happy with our performance today. We’re getting on with it, through a new leadership team and structure that’s promoted top talent, cleared away unnecessary layers and silos, and started to speed up decision-making.

In electricals, we’re focused on gross margin recovery. In mobile, we’re stabilising our performance through improvements to our proposition and network agreements. In both, we’ll work hard to improve our cost efficiency. We won’t tolerate our current performance in mobile, or as a Group. We know we can do a lot better.”

The Carphone Warehouse bit of the group seems to be especially struggling. The inference seems to be that Baldock isn’t happy with the dynamic between his company and the network operators, whose products and services he resells. It remains to be seen how strong his bargaining position is on this and the sudden decline of Phones4U illustrated what happens when resellers displease their suppliers.

As well as forecasting a further shedding of profit the Dixons Carphone outlook announced it would be closing down 92 of its 650 standalone Carphone Warehouse retail outlets. There has been talk of the smartphone upgrade cycle extending in reports and that’s unlikely to change, so we could be seeing the terminal decline of the UK’s last remaining independent mobile phone retailer.