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Dixons Carphone electrical sales struggle

Dixons Carphone struggled with slowing electrical sales in the 10 weeks to January 6, according to its latest trading statement.

Like-for-like electrical sales in the UK and Ireland increased by just one per cent, which Dixons claimed was a result of some increased costs in margin due to channel mix. This compares with a growth of six per cent in the 26 weeks to October 28 last year.

However, group chief executive Sebastian James claimed it had grown market share in “pretty much every category”.

The small growth seen was a result of strong performance and market share gains in large-screen TVs, SDAs, mobile and gaming in particular, as well as continued market share gains in MDAs the group explained.

Group revenue increased by four per cent year-on-year and six per cent on a like-for-like basis. UK and Ireland like-for-like group revenue was up by three per cent.

Dixons said it expects to deliver group headline profit before tax for 2017/18 in the range of £365 million to £385m.

Sebastian James
Sebastian James

“I am pleased to announce a six per cent growth in group like-for-like revenue over Christmas this year against strong comparables last year,” Mr James said. “The stars of the show were unquestionably Greece and the Nordics, where like-for-like revenues rose by 23 per cent and 11 per cent respectively. I was also satisfied, in this more cautious consumer environment, with like-for-like growth of three per cent in the UK and Ireland. In UK and Ireland electricals, our Boxing Day sales did not quite mirror the promise of our very strong Black Friday week, but we are very confident that we grew market share in pretty much every category. Particularly strong this year were large-screen TVs, gaming, smart tech, and SIM-free phones. We sold just under one in three SIM free phones in the UK market over the period, further strengthening our customer relevance. Our international businesses had a terrific Christmas period, with Greece enjoying its first real Black Friday and the Nordics benefiting from better availability and delivery propositions following our investment in a new small product warehouse last year.

“Looking forward, we continue to keep our antennae twitching for any material change in consumer behaviour, but remain relentless in our focus on providing the best value, choice, and service to our consumers. For the remainder of this year we have an early Easter, a new Samsung phone and the first week or two of our World Cup promotion to look forward to, and work continues on redefining and refocusing our Carphone Warehouse business to be a simpler, less capital-intensive model. We expect to deliver a full-year PBT in the range £365m to £385m and, with rather better cash conversion this year, we expect year-end net debt to be around £250m.”

Eleanor Parr
Eleanor Parr

Commenting on the results, Eleanor Parr, retail analyst at GlobalData, said: “Dixons Carphone have released muted results, with UK and Ireland revenue growing by just one per cent, slowing on last year’s growth of four per cent. Christmas trading figures were published earlier than planned, following the shock announcement CEO Sebastian James’s resignation to join Boots. This comes just weeks after Humphrey Singer, Dixons Carphone’s finance director, announced his plans to move to Marks and Spencer and Graham Stapleton, CEO of Dixons Carphone’s software business, resigned to run Halfords. Alex Baldock, the outgoing CEO of Shop Direct, will replace Mr James in April this year. Mr Baldock’s track record, delivering five years of consecutive growth for Shop Direct, with particularly strong electrical sales over Christmas, will reassure shareholders that the business is in good hands after a period of uncertainty.

“Sales growth slowed in the UK and Ireland, with like-for-like revenue growth halving from six per cent in 2016, to three per cent this year. The retailer cited weaker Boxing Day sales, following extensive promotional activity over Black Friday, which – like many other electrical retailers – it extended, offering promotions for over two weeks. Moreover, in the run-up to Christmas, the retailer discounted heavily, bringing forward Boxing Day sale purchases. However, with total revenue only up one per cent, this suggests the level of promotions encouraged shoppers to purchase goods they would otherwise have bought at full price and did not significantly boost top-line sales. In addition, this extensive discounting has further diluted profits, with group headline profit before tax guidance for FY 2017/18 reduced to £365m to £385m, from £360m to £400m in its last update in December.”

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