Dixons issues profit warning as mobile sales hit

Dixons Carphone has warned that its profits will be lower than expected this year due to a “challenging” mobile phone market and lower EU roaming charges.

In a trading statement, the retailer said it now expected profits in the range of £360m to £440m – down from £501m last year. This was despite six per cent growth in like-for-like sales in the first quarter ending in July. Following the announcement, Dixons Carphone’s shares fell by around 30 per cent.

The company also said it would take a £10 million to £40 million hit from changes to EU roaming legislation.

Said chief executive Sebastian James: “Over the last few months we have seen a more challenging UK post-pay mobile phone market. Currency fluctuations have meant that handsets have become more expensive while technical innovation has been more incremental. As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year.”

He added: “Over the longer term, we believe that the post-pay market will largely return to normal, but, in the meantime, we have taken a conscious decision to invest in our margin and proposition to maintain market share and scale so we remain in a strong position as the market leader when this happens.

“While this investment will cause a shortfall in profits for our phone business, we do, however, expect overall profit in our core retail operations to be in line with last year supported by good progress in our UK and Ireland, Nordic and Greek electrical businesses.

“It is good to see this performance from our UK electrical business, particularly against the Euros football championship last year, as well as strong sales from our Nordic and Greek businesses,” said Mr James.

“In all of these markets we have seen growth in revenues, market share and profitability with overall product margins remaining flat in electricals.”

The retailer said it continued to trade well in all geographic markets, with like-for-like sales up six per cent across the group.