Electricals giant Dixons Carphone is expected to deliver another commendable set of results when it updates the market next week.
Despite the fourth-quarter figures likely being negatively skewed by the later launch of Samsung’s newest Galaxy smartphone this year, the retailer is anticipated to demonstrate continued sales growth.
But Dixons Carphone’s good fortunes don’t stem from favourable conditions in the electricals sector.
In fact, there’s talk of a slowdown in big-ticket electrical purchases, as the slumped pound pushes up prices and hampers demand, and uncertainty in the run-up to the general election delays discretionary spending.
The mere mention of “more uncertain times ahead” by chief executive Seb James unnerved investors last year, causing Dixons Carphone’s share price to dip even after it reported a 19% surge in pre-tax profits at its half-year.
Still, Dixons Carphone has consistently proven to be more resilient than the market anticipates.
From an analyst’s perspective, what gives Dixons Carphone its spark is its services proposition.
And, having now completed the roll-out of its three-in-one superstores, which bring Currys, PC World and Carphone Warehouse under one roof, the business is in a strong position to flaunt these services.
As the ambitious James himself said, it is leveraging such “unique assets” that will allow the retailer to make Amazon – its deadliest rival – ”redundant”.
“Whereas a proliferation of firms have cashed in on offering web optimisation services, HoneyBee is aimed at supporting person-to-person retail sales, either in-store or over the phone”
Following a successful trial in Leeds at the start of this year, James has ordered the installation of in-store KnowHow clinics across the estate. The business can build customer loyalty by offering same-day iPhone repairs, for example, and ensuring people’s tech and appliances remain fully functioning.
It has also garnered favour by ramping up its business services offer and showcasing the benefits of its HoneyBee software.
Whereas a proliferation of firms have cashed in on offering web-optimisation services, HoneyBee is aimed at supporting person-to-person retail sales, either in-store or over the phone.
During turbulent times and in the face of stiff competition, these revenue streams are the sort of innovations – alongside its bespoke financing services and own phone network – that lengthen Dixons Carphone’s lifeline with the customer and its ability to grow market share.
But the retailer is not immune to today’s challenging trading environment.
The bigger picture
Like most retailers, Dixons Carphone’s margins have been made vulnerable by higher sourcing costs. James himself admitted that the price of goods in certain categories, such as Apple products, have already increased.
It was also buffeted by the “patchy” availability of some higher-margin mobile handsets over Christmas.
“For the self-confessed big-picture thinker, each service and add-on brings James another step closer to launching his proposed pay-monthly membership model, inspired by the burgeoning sharing economy”
However, confidence is currency. And confidence is something James carries in spades.
While Dixons Carphone’s services will prove a valuable crutch during the inevitably testing years to come, as the UK negotiates the terms of its exit from the EU, James has his eye on a bigger prize.
For the self-confessed big-picture thinker, each service and add-on brings James another step closer to launching his proposed pay-monthly membership model, inspired by the burgeoning sharing economy.
Solid fourth-quarter sales, in line with City predictions, should give bricks-and-mortar sceptics another reason to believe that the electricals boss is capable of – as he terms it – “revolutionising retail as we know it”.