Dixons Carphone Ireland ‘performing strongly’ despite warning

Shares nosedive at UK parent company after unexpected profit forecast

The warning halts what was until now an unblemished record of profit growth and is likely to add to investor concerns

The warning halts what was until now an unblemished record of profit growth and is likely to add to investor concerns

 

Dixons Carphone Ireland is continuing to “perform strongly” in the Irish market despite a bleak profit warning from its UK parent on Thursday.

The company forecast an unexpected drop in earnings this year, sending its shares plunging as an increasing number of Britons opt not to upgrade their mobile phone.

The UK’s largest electronics retailer said pretax profit would be in the range of £360 million ($460 million) to £440 million in the year through April. The average analyst estimate was £508 million.

Shares dropped as much as 30 per cent in early trading, the most since the company was formed in a merger three years ago.

However, Mark Delaney, managing director of Dixons Carphone Ireland, which incorporates Currys PC World and Carphone Warehouse, said like-for-like sales were growing in the Republic, especially across consumer electrical goods.

“We have experienced strong online sales growth,” he said. “Currys PC World has performed exceptionally well with increased market share in all categories including TV, computing and white goods.

“To put in perspective, this year Currys PC World has surpassed the record TV sales during the 2016 Euros.

“Carphone Warehouse continues to grow market share in the Irish mobile market. We are adding more customers on a first-time connection basis. In a growing market, Carphone Warehouse has already capitalised on Irish consumers increasing their smartphones usage.”

Mr Delaney said the launch of the iPhone 8 and Samsung Note 8, coupled with upcoming “crucial sales periods”, meant the company expects “further growth”.

“There are certain specific challenges facing the UK mobile market such as a weakening sterling, changing consumer purchasing habits in a less mature market and softening consumer confidence due to Brexit,” he said.

“In Ireland consumer confidence remains buoyant and we are optimistic in the ability of Currys PC World and Carphone Warehouse to capitalise on the many opportunities that lie ahead and we continue to innovate and invest.”

The UK warning halted what was until then an unblemished record of profit growth and is likely to add to investor concerns that the retailer is acutely exposed to a slowdown in consumer spending.

“Currency fluctuations have meant that handsets have become more expensive while technical innovation has been more incremental,” chief executive Seb James said in the statement. “We have seen an increased number of people hold on to their phones for longer.”

Speaking on a conference call with analysts, Mr James said customers are keeping their handsets for an additional four-to-five months. The market’s weakness won’t be long term and Dixons Carphone is optimistic that the introduction of Apple’s iPhone 8 will be a catalyst for growth, Mr James said.

The hit to profit from the market’s slowdown will be exacerbated by a negative one-time charge of between £10 million and £40 million related to changes in European Union roaming legislation, the company said.

Same-store sales rose 6 per cent across the group in the 13 weeks ended July 29th.

(Additional reporting: Bloomberg)