Carphone Warehouse: A sign of things to come?

Decision to close Irish operations reflects ‘crisis in the retail landscape’, due to Covid-19 and Brexit

Carphone Warehouse had accumulated losses of €58 million here by the end of April 2019, a signal that it was trading poorly long before the Covid-19 pandemic hit the Irish economy. Photograph: Dara Mac Donaill

Carphone Warehouse had accumulated losses of €58 million here by the end of April 2019, a signal that it was trading poorly long before the Covid-19 pandemic hit the Irish economy. Photograph: Dara Mac Donaill

 

Is Carphone Warehouse’s decision to fold its tent in Ireland, closing 81 outlets and laying off 486 staff in the process, a portent of things to come when the retail sector reopens in the coming months?

Possibly. In its statement, Carphone Warehouse noted a number of consumer trends that had influenced its decision to shutter the Irish business. They included consumers changing their handsets less frequently, and buying SIM-free phones. And shifting online to buy rather than visiting stores.

“The change in shopping behaviours has been accelerated by the pandemic,” the company said, adding that footfall in stores was down 40 per cent over the past year.

It is also true that Carphone Warehouse’s Irish operation has been consistently lossmaking. In the 12 months to April 27th, 2019, Carphone Warehouse Ltd dialled up a loss of just under €1.6 million, having recorded a deficit of almost €1.9 million a year earlier.

Losses

Its accumulated losses had widened to €58 million by the year end. A look back through its accounts shows that it recorded a profit just once (a surplus of €1.6 million for the year to the end of March 2014) in the decade leading up to its latest statutory filings.

The company clearly couldn’t continue along this path for too much longer, pandemic or no pandemic.

Duncan Graham, managing director of Retail Excellence, an industry representative group, said the decision by Carphone Warehouse reflected the “crisis in the retail landscape at present”, due to the combined impact of the pandemic and Brexit.

Mr Graham claimed that hundreds of retailers around the country were “similarly on the brink of closure due to their inability to trade over several months”. He may be proved right on that score in the fullness of time.

But the Carphone Warehouse case highlights the moral hazard involved for the Government as it begins to withdraw the various supports it has provided to businesses during the lockdown restrictions.

Who does it continue to support and who does it let fail? The Government has some tough choices to make in the months ahead.

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