Dixons Carphone shares dive on profits warning

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Shares in Dixons Carphone have sunk by nearly 20% after it warned of a sharp fall in profits this year.

The mobile phone and electrical goods retailer also said it would close 92 of its more than 700 Carphone Warehouse standalone stores this year.

It expects pre-tax profits for 2017-18 to be £382m, but it predicts profits will fall to £300m in 2018-19.

Chief executive Alex Baldwin said “nobody is happy with our performance” but the problems were all “fixable”.

The company blamed “challenges in UK mobile” for its problems, including “contractual constraints” such as people not renewing their handsets as frequently.

Profit margins in its electrical business were also dented in the fourth quarter because people were buying less profitable items, such as white goods like washing machines.

However, total sales were 3 percent higher in the year to 16 April, while like-for-like sales were up 4percent.

In the UK, sales grew 2 percent for the year as a whole, and by 1 percent in the fourth quarter.

The international division division did better, with like-for-like sales in the Nordics up 9 percent in the year and Greece up 11 percent.

‘Plenty to fix’

Mr Baldock, who took over as group chief executive earlier this year, said the international business was in “good shape” so “we’re focusing early action on the UK”.

“We won’t tolerate our current performance in mobile, or as a group. We know we can do a lot better,” he added.

“Eight weeks in the business have cemented my optimism about Dixons Carphone’s long-term prospects. I’ve found exceptional strengths, and though there’s plenty to fix, it’s all fixable.”

Neil Wilson, chief market analyst for Markets.com, described the profits warning as “grim” but agreed the problems were “all entirely fixable”.

“Dixons looks a bit flabby, and the market is just as soft, but there should be some easy wins in terms of making it leaner, especially around store closures,” he added.

 

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