This time a year ago, bosses at Dixons Carphone were toasting record profits and gloating that the electricals retailer was ‘well positioned to flourish’.
One year later and the tone could not be more different as the Currys, PC World and Carphone Warehouse owner prepares to report a sharp fall in earnings on Thursday.
The decline is expected to be around 23 per cent, with pre-tax earnings to come in near the £382million mark for the year to the end of April.
Dixons Carphone now has a new executive team following a mass exodus over the last year
The retailer’s nosedive can partly be attributed to weakness in its mobile phone division.
It has complained over the last year or so about consumers not rushing to upgrade their phones, instead holding onto handsets for longer and even switching to sim-only contracts – a trend that is weighing on the firm’s bottom line.
But disappointing figures could not come at a worse time for the stricken firm, which employs around 44,000 people, and will only serve to mount pressure on new chief executive Alex Baldock, who replaced Seb James in April.
Former CEO Seb James will soon take up a new post as UK boss of Boots
Less than a month ago, and just eight weeks into his tenure, the former Shop Direct boss had to come clean about another anticipated profit drop in the fiscal year that has just begun.
Baldock’s announcement ruffled feathers and triggered a fall in the share price when, in an unprecedented kitchen sinking, he exposed holes in the business and pointed the finger at his predecessor.
And, just last week, Dixons Carphone was bruised again when it emerged that a mammoth data breach had led to millions of customer details being hacked.
Phone repair shops cutting upgrades
The results on Thursday should lift the lid, not just on dented earnings, but on the efforts taken so far to stop the rot at Carphone Warehouse.
Hard-pressed, savvy, consumers, less compelled by new handset releases with only incremental improvements, are putting off upgrading their phones until absolutely necessary.
An iPhone X with 256GB of memory costs around £1,109 at Carphone Warehouse after Apple put up prices last year blaming currency fluctuations
As the cost of smartphones continues to rise – the latest iPhone costs over £1000 – shoppers will only hold onto them for longer, aided by a proliferation of high street phone repair chains, including Dixons Carphone’s very own KnowHow repair centre.
The group was also stung last year by the changing regulation around mobile data use in Europe.
At the interim mark, it claimed that negotiations were underway with network providers in attempt to overhaul and future proof the model.
And, in December, deputy chief executive Andrew Harrison walked away from his role and the group’s board to concentrate on Carphone Warehouse as chairman, and lead its revival.
Baldock has already taken the issue into his own hands by pledging to shut nearly 100 Carphone Warehouse stores.
But the City will be listening for more reassuring noises on this front on Thursday, or else the much flaunted merger of Dixons and Carphone Warehouse risks beginning to look like somewhat of a poisoned chalice.
Can Baldock turn it around?
Sales are still on the up – boosted partly by strong promotions and the strength of its store portfolio.
However, margins are heading south, as the retailer is challenged to meet the low prices offered by the likes of Amazon and balance rising running costs.
New CEO Alex Baldock, who joined from Shop Direct, took the helm in April
Baldock, who instigated a thorough review of the firm when he joined, unearthed a multitude of problem areas and has wasted no time getting started on fixing these.
He immediately stripped out a layer of top-tier management to reduce silos, appointed the firm’s first chief customer officer and committed to spending £30million on the in-store experience.
But shareholders will want more detail on how Baldock plans to reverse the firm’s fortunes and recover its plundering share price – no mean feat given the current retail climate.
Dixons Carphones’ market cap now stands at £2.27bn, only just above the value of the firm when it first merged.
Shares are down at around the 194 mark – an almighty drop from its highs of 500 in 2015 – and have fallen 37 per cent in the last 12 months.
According to HSBC’s Andrew Porteous, Baldock is a ‘man with a plan’, but analysts remain bearish. And if Baldock has stumbled across any more skeletons in the closet, his already mammoth task may be harder than first anticipated.
Thursday should at least be the final time Baldock need look over his shoulder and explain away errors made under another team’s watch.
The prelims, although set to be painful, should finally draw a line in the sand for the new boss and allow him to start proving his mettle as CEO of a firm that has well and truly lost its spark.