Dixons Carphone issues profit warning against declining phone sales

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Electrical retail group Dixons Carphone has issued a profit warning in its trading update for the 13 weeks ended July 29 2017.

While the Group cites good performance in electricals in the UK & Ireland, challenging conditions in the UK mobile phone market will impact profitability.

As a consequence of these combined factors management now expect to deliver Group Headline PBT for 2017/18 in the range of £360m to £440m with core trading profitability in line with last year.

Group chief executive Seb James commented: “We continue to trade well in all geographic markets with like-for-like sales up 6% across the Group. 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. In all of these markets we have seen growth in revenues, market share and profitability with overall product margins remaining flat in electricals.

“However, over the last few months we have seen a more challenging UK postpay mobile phone market. Currency fluctuations have meant that handsets have become more expensive whilst 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 postpay 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.

“Whilst 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 & Ireland, Nordic and Greek electrical businesses.”

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