After a profit warning in May and the emergence of a huge data breach in June, investors will be relieved that Dixons Carphone had a relatively uneventful quarter and is on track to meet its full-year targets.
In a trading update ahead of a meeting with shareholders, the electricals giant behind Carphone Warehouse and Currys PC World said it still expects to generate full-year pre-tax profits of around £300million.
This marks a big drop from the £382million it made in its last financial year, and an even bigger drop from the £500million it posted a year earlier.
However, the figure is in line with what new boss Alex Baldock set out earlier this year after he replaced longstanding boss Seb James and laid bare the extent of the retailer’s issues.
Dixons Carphone is the group being Currys PC World and Carphone Warehouse
Group like-for-like sales were flat in the three months to the end of July, but down 2 per cent on a total basis.
Although the World Cup gave TV sales a boost in the UK, the retailer was dragged down by a weaker performance in white goods and computing in its home market.
Comparable sales at its struggling mobile phone division were down 1 per cent during the quarter as, the retailer said, the postpay market continues to decline and the Sim Only trend gains momentum.’
Baldock is steering a turnaround at the firm’s mobile phone unit, where a slowdown has been driven by hard-pressed consumers holding on to older devices for longer and going sim-only. He has already pledged to shut nearly 100 Carphone Warehouse stores this year.
Analysts hoped the retailer would shed some light on how its ongoing discussions with mobile network operators are progressing, but as independent retail analyst Nick Bubb pointed out, Baldock ducked the issue.
‘No news is probably bad news, but we will have to wait for the interims in December for that to be confirmed,’ Bubb said.
The firm did not give an update on its data breach either, which led to 5.9 million bank card details and 10 million personal data records being hacked last year. However, shareholders are expected to grill the firm on the issue at its AGM later today.
Alex Baldock, former boss of Shop Direct, took the helm at Dixons Carphone earlier this year
Baldock said: ‘First quarter performance was in line with expectations. We’ve maintained or grown our leading market positions, and our full year profit before tax guidance of around £300million remains unchanged.
‘We’ve made good progress in setting a clear long-term direction for the business, one that sharpens our focus on the core, and that better joins up both our offer to customers and our business behind the scenes.
‘I look forward to giving a fuller update on our plans and progress in December.’
Highlights come in the form of online sales growth – up 13 per cent – and a strong contribution from its stores in Greece – up 9 per cent.
Shares in Dixons Carphone, which have fallen 17 per cent since the start of the 2018, jumped nearly 3 per cent on the news.
‘The dividend yield of 6.9 per cent is a compelling reason to stay with the shares as the company’s transformation plays out,’ said Richard Hunter, head of markets at Interactive Investor.
‘Even so, Dixons Carphone’s issues will not be resolved overnight. Regular smartphone updates across the industry are dwindling as the market approaches saturation point.
‘The general pressure on retailers and the possibility of UK consumer retrenchment also weigh on prospects. Ahead of the next update in December, there remains much for management to do under the bonnet,’ he added.