Dixons Carphone has revealed full year profits will be slightly ahead of expectations due a stronger than expected third quarter. Here’s what the analysts said.
Group like-for-like sales were reported up 5%. In the regions, the UK and Ireland like-for-like sales were up 5%, helped by mobile connections/sales from Carphone. We estimated total sales were up 3%. However, on our calculations Dixons Carphone sales growth is below that of John Lewis total electrical sales growth rate of 8% over the same period.
The Nordics reported local currency like-for-like sales up 3%, but reported sales were probably down double digit due to the continued devaluation in the Norwegian Krone. Southern Europe was reported up 9% in like-for-like growth in local currency (consensus +2.5%) or flattish in reported sales growth. CWS reported that the Sprint JV should go into 500 stores, and they have signed a new distribution agreement with Talk Talk. There was no comment on current trade but management stated it had a strong Black Friday and the promotional period after Christmas was good so stock positions should be clean. – Mike Dennis, Cantor Fitzgerald
The role of Black Friday has fundamentally changed how electronic specialists are tackling the important Christmas trade. While rival Argos struggled to maintain any balance over Christmas, Dixons Carphone has excelled with like-for-like sales growing 5%. This success is down to its decision to reset the business to win on both Black Friday and Boxing Day and an ability to differentiate between consumers - those that use the products - and shoppers - those that buy for others to use. With promotions, marketing and stores geared up to drive gift purchases on a record Black Friday, Dixons Carphone were still able to perform strongly on Boxing Day by increasing promotional activity on more relevant categories such as soundbars, televisions and home electricals, to drive self-purchases. The further roll out of its three-in-one concept in the year shows shoppers remain at the heart of all decision making, a prerequisite for any retailer wanting to win in the age of shopper first. – Simon Johnstone, Kantar Retail
A strong peak trading performance in the UK, largely from mobile underpins numbers for this year, notwithstanding Nordic FX/macro pressures. Further UK restructuring should improve underlying profits by £20m (FY18). Dixon Carphone’s Connected World Service’s announcement of deals with Sprint, Apple and TalkTalk we think improves visibility over the business unit’s potential. The shares trade at a modest sector premium, reflecting profit progression from ongoing restructuring, market share gains and development of CWS. – Alistair Davies, Investec
Dixons Carphone has announced it is to embark on a rollout of its 3-in-1 store format across the UK & Ireland, merging the remaining PC World and Currys stores and opening Carphone Warehouse shop in shops, reducing store numbers by 134, while making each individual store trade more efficiently. Most of the work will be implemented in 2016/17, and it expects an £20m incremental uplift to annual earnings once complete. While growth has previously been aided by the demise of competitors, this rollout will enable the retailer to continue its path of organic revenue and profit growth that is testament to a successful merger. – Andrew Stevens, Verdict