Dixons Carphone has reported a strong festive season as it reported group like-for-likes up 7% during a ‘roller coaster’ Christmas. Here’s what the analysts say.

Analysts react to a strong Christmas performance from Dixons Carphone

Alistair Davies, Investec

“Tactical promotions have enabled Dixons Carphone to deliver a strong Christmas trading performance, with the business taking profitable market share through Black Friday.

“Careful planning ahead of Black Friday to work with suppliers on targeted (not blanket) promotions, allowed the business to deliver a positive surprise on gross margins, described as ‘stable’.

“Management has indicated expectations for FY15 to be above consensus and moving into FY16 we see scope for the upgrade cycle to continue.”

Mike Dennis, Cantor

“The recent share price dip was due to the Best Buy USA Christmas trading update on January 15 that disappointed investors, especially with a negative sales outlook for H1/2015.

“However, we believe Dixons has done better than John Lewis electricals and home technology total sales, which grew by 4% over the same period and included a strong November and early December period due to Black Friday, with sales up 30%.

“Compared to John Lewis electricals sales we estimate Dixons Carphone has been widening the sales performance gap from Q2 to the Q3 Christmas period showing that Dixons pricing, service and range improvements are gaining share.  

“On our calculations, Dixons Carphone still has plenty of upside given the significant amount of synergy benefits (£100m+), improved store trading margins, benefit from Phones4U store closures and conversions and, the opportunity in the fast growing CWS business.”

Nick Bubb, independent analyst

“Today’s trading update from Dixons Carphone has delivered a nice beat to City expectations. So it looks like the recent tweets from chief executive Seb James about peak being “a big hit” were remarkably well informed.

“Investors were clearly nervous about the reports from Argos and John Lewis of weak tablet PC sales, but the overall Christmas period was better than feared, given the spread of the newly merged business.

“Seb James says that ‘There have been some marked shifts as product lifecycles and ways of buying change… and white goods had a very good peak-trading period across the board with particularly rapid growth in online’ (the latter comment is an obvious dig at AO.com).”

Himanshu Pal, Kantar Retail

“Black Friday will have caused the retailer to suffer some marginal decline in the three to four weeks leading up to Christmas. Black Friday has dented margins for other retailers and Dixons Carphone has done well this year to avoid an impact on its overall performance.

“Black Friday promises to be an even bigger trading event in 2015. Dixons Carphone will need to ensure its supply chain and stock levels are up to scratch to meet increasing demand at this time.

“The retailer has used the collapse of Phones4U to its advantage and is also profiting from its high street presence. Matching online prices and launching an app to give customers buying confidence has all helped trading results.”

David Alexander, Conlumino

“Despite its website buckling under the pressure of unprecedented demand, Dixons Carphone was able to reap the benefits of this latest Stateside import.

“The retailer maintaining a stable margin and announcing that overall headline profit before tax will be ahead of market expectations. This is no mean feat given the efforts it has had to make to improve price perceptions in the wake of continued incursions by online players.

“Dixons Carphone’s strong performance in click and collect is notable, as the retailer’s store estate proves its worth in the battle of clicks versus bricks. Given the continued growth of online sales and the success of pureplay retailers like Amazon and AO this Christmas, that click-and-collect advantage will no doubt prove increasingly crucial in keeping Dixons Carphone one step ahead of pureplay rivals in the months and years to come.”