Mobile phone troubles to drag on Dixons Carphone festive sales

FESTIVE trading figures from Dixons Carphone on Tuesday are set to show ongoing woes in its mobile phone arm as the retailer battles to halt sliding sales in the division.

Dixons Carphone is due to reveal its festive trading figures.
Dixons Carphone is due to reveal its festive trading figures.

The group warned last month that it may look to shut stores after being hit by a 3 per cent fall in half-year sales at the troubled mobile division, which contributed to a 60 per cent plunge in half-year profits.

It parachuted deputy chief executive - and former Carphone Warehouse boss - Andrew Harrison into the unit as chairman just before Christmas as part of efforts to arrest falling sales.

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Analysts are expecting solid electricals sales to help offset the mobile phone difficulties over the festive season, with the group already confirming record trading on Black Friday.

It is thought the delayed launch of the iPhone X may have helped provide a much-needed fillip to the group, although reports have suggested mixed demand for the new model.

Analysts are forecasting a 2 per cent rise in overall UK like-for-like sales over the 10 weeks to January 6, which would mark a slowdown on the 3 per cent growth in the second quarter.

It is also sharply lower than the 6 per cent sales growth over the previous festive season.

The high street chain saw interim profits tumble to £61 million, while trading was dragged down by a 3 per cent fall in comparable sales at its mobile phone division.

UK profit fell from £130 million to £34 million in the period. The results came after Dixons Carphone warned in August over a Brexit profit hit as the soaring cost of new mobile phones means people are holding on to older models for longer.

Mr Harrison - who led Carphone Warehouse until its £3.8 billion merger with Dixons in 2014 - has been given the job of ensuring the group improves its mobile phone sales.

It has been a tough past few months for Dixons, which also saw Carphone Warehouse hit with a £400,000 fine in early January after a security failure allowed unauthorised access to the personal data of millions of customers.

One of the retail giant’s computer systems was affected in the 2015 cyber attack when intruders gained access through out-of-date WordPress software using valid login credentials.

Speaking last month, at the time of the publication of the interim results, Seb James, the group chief executive, said: “Our interim results highlight the continuation of trends that we saw in our Q1 (first quarter) trading update. Overall we have delivered strong free cash flow, expect to deliver full year PBT (profit before tax) within the £360m to £400m range and the board intends to maintain the full year dividend.”

He continued: “As we said in August, the UK postpay mobile phone market is tougher, with a combination of higher handset costs and relatively incremental technology growth continuing to cause customers to hold on to their handsets for longer and some to choose a SIMO contract in the meantime.

“In addition, the later launch of the iPhone X pushed some sales into the second half of our financial year. Throughout the period, we made a very conscious decision to fight hard to drive sales in our product offering, and this has impacted mobile profitability. These actions have helped maintain scale, reinforce our position as market leader, and ensure our relevance to the customer.

“We recognise that the performance of the mobile division needs addressing, and are taking action to adapt our model in order to cement our place in a changing world. We will update the market on these developments in due course, but we believe that we can, over time, reduce the complexity and capital intensity of our mobile business model, and increase the simplicity and profitability of what we do.”

Dixons Retail and Carphone Warehouse merged to create Dixons Carphone plc in August 2014.

Dixons Retail can trace its roots back to 1937 when Charles Kalms opened the first Dixons photo studio in Southend. Dixons listed on the London Stock Exchange in 1962.

Carphone Warehouse was founded in 1989 by Charles Dunstone and made its stock market debut in 2000.