Dixons Carphone in bid to combat mobiles misery

Dixons Carphone on Tuesday carried out emergency surgery on its struggling mobiles business as customers shun more expensive handsets.

The electricals retailer’s mobile phone arm has been under the spotlight since the summer when it hit markets with a catastrophic profit warning which caused shares to plunge more than 20%.

Chief executive Sebastian James said: “The truth is customers are changing their behaviour in the way they buy phones — increasingly on leasing or credit.”

He said he will overhaul the way handset sales are financed and it will now look for a third party to foot the bill for some of the costs. “I’m very optimistic we can do it,” he said. “It’s too early to talk about restructuring costs.”

Shoppers typically pay a small deposit up front and a monthly fee thereafter; until now, Dixons Carphone has been paying for the phone.

The moves comes after the retailer revealed that pre-tax profits fell to £61 million in the six months to October 28 from £154 million a year earlier, albeit hit by some one-off charges it had previously flagged.

Revenues edged down 1% to £4.8 billion, and it has now shifted down its pre-tax profits for the full-year to between £360 million and £400 million. But despite this, the City was unfazed. The news that Dixons Carphone is maintaining its dividend at 11.25p for the full year sent shares up 5% to 176.9p. “There’s no question mobile has been more challenging this year and definitely less profitable than it was last year,” said James. “Electrical seem to be doing really well. It’s a mixed bag.”

Same-store sales in mobile fell by 3% as people shun expensive mobile phones and hold onto their old handsets for longer. The late launch of the iPhone X, which pushed some sales into the second half of the year, also hit growth, it said.

In stark contrast, its electricals business grew steadily — up by 7% — and Black Friday was a “cracker” after it sold goods worth just under £500 million. James is banking on Boxing Day to lift sales as shoppers splash the cash on PC games, toasters and washing machines.

Some analysts suggested that the struggling mobile phone market could lead to store closures. “We review our store estate all the time and what needs to be done,” countered James, who added that he won’t shut any shops imminently.