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Dixons Carphone shares plummet 25% after revealing large losses at mobile phone shops

Retailer takes hit as shoppers upgrade smartphones less frequently

Ben Chapman
Thursday 20 June 2019 11:46 BST
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Carphone Warehouse is proving to be a continual drag on Dixons’ bottom line
Carphone Warehouse is proving to be a continual drag on Dixons’ bottom line

Shares in Dixons Carphone plummeted by more than a quarter on Thursday after the retailer reported a yearly loss and warned there is “more pain” to come as consumers renew their smartphone contracts less frequently.

The company lost £259m in the year to 27 April, down from a pre-tax profit of £289m in the previous financial year.

The annual loss includes charges of £557m, including a £383m writedown of its UK mobile business, Carphone Warehouse. The company warned in December that it had been hit by a trend among customers to delay upgrading their phones.

Sales dipped 1 per cent, Dixons Carphone revealed in its full-year results statement.

“The market is changing in the way we described in December, but doing so faster,” Alex Baldock, the firm’s chief executive, said. “This means taking more pain in the coming year, when mobile will make a significant loss.”

Mr Baldock said that this year was a low point for the company, which now expects to break even in its mobile business within two years as it implements a £200m cost-cutting plan and begins to benefit more from the integration of its Dixons and Carphone Warehouse brands.

The company has renegotiated legacy contracts with mobile networks, which previously included demanding targets for smartphone sales volumes. It has also made improvements to customer experience, Mr Baldock said.

The company predicted a headline profit before tax of around £210m for the current year, before exceptional costs of around £80m.

Annual pre-tax losses

£259m

Release dates for Apple smartphones are not quite the blockbuster events they used to be, with many users feeling that the differences between older and newer smartphone models are becoming less pronounced.

“The mobiles business Carphone Warehouse is proving to be a continual drag on Dixons’ bottom line and things are only set to get worse, according to today’s full-year announcement from Dixons Carphone,” said Emma-Lou Montgomery, an associate director at Fidelity Personal Investing.

“If things look bad this year, they’re going to look even worse next year, when the combined group says the mobile business will make a ‘significant loss’.”

Dixons Carphone’s shares crashed more than 25 per cent to 99p before recovering to trade down 13 per cent at 108.3p on Thursday morning.

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