Dixons Carphone smarting from £440m loss as it writes down goodwill on mobile biz

No one's buying new friggin' handsets, says retailer

54 Reg comments Got Tips?

Dixons Carphone today reported a £440m statutory loss at the halfway stage of its fiscal '19 after writing down the goodwill of its mobile division, sending its shares tumbling by almost 12 per cent.

The results for the 26 weeks ended 27 October were filed along with the "vision" from new broom Alex Baldock, which includes handing the 30,000-strong workforce £1,000 worth of shares in the hope that giving them a stake in the business will lead to improved service.

Group sales were up 1 per cent year-on-year to £4.893bn; UK & Ireland electrical grew 2 per cent to £1.997bn; UK & Ireland mobile was down 4 per cent to £1.009bn; Nordics was up 1 per cent to £1.675bn; and Greece grew 11 per cent to £212m.

Dixons said consumer electronics fuelled the rise in its homeland, along with "gaming stations" rolled out in seven stores, but said computing sales "remained softer, against which we gained share".

Falling mobile revenues reflect "the challenges in the 24-month postpay market in the period, partly offset by improvements in SIM Only and SIM Free categories".

Dixons said in May it plans to shutter 92 Carphone Warehouse stores following a profit warning as customers refresh handsets less frequently.

The company reported a profit before tax of £50m, versus £73m in the year-ago period, but charges of £490m, of which £338m pertains to non-cash impairments, left Dixons nursing a loss of £440m.

Baldock told Radio 5 Live: "Part of the transformation that we have to make is the turnaround of Carphone Warehouse, our mobile business.

"There is a lot to do there and that's reflected in the scale of the write-offs we've announced today."

Dixons talked up four initiatives or "levers of value" that it will concentrate on to improve the entire business: online, providing credit services, making itself easy to shop at, and improving its fortunes in mobile.

It said it turns over roughly £1.5bn online in the UK and Ireland each year and described itself as "underweight" with its share of the e-commerce sector below that of its store share.

The range sold via the web will be bulked out, Dixons said, and it will try to improve the user experience to find items more easily, focus on "smartphone first" and push credit and services.

On credit, the retailer said buying tech is expensive, "particularly at the big-ticket item end of the market", and credit "makes it affordable, as well as giving customers reason to shop with us". And importantly, "[credit] is profitable in its own right". Ain't that the truth.

The mobile division is "loss-making and we need to change that. Our challenges are well understood in the market, i.e. reduced handset volumes and mix changes have resulted in declining share for us. And our profitability has been impacted by mix, contractual pressure and an inflexible cost base."

And to get buy-in from the workers, Dixons said: "Over 30,000 colleagues are to become shareholders through new share awards, aligning business behind strategy."

The share price fell to £132.5 this morning from £150.5. ®


Keep Reading

Brit mobile network EE follows O2 by ending trading relations with retailer Dixons Carphone

'It’s hard to see how Carphone can turn around its mobile business'

Downwardly mobile? Well, things aren't looking up for Dixons Carphone's phone biz

Sales crash by 20% and that break-even period has just been pushed out by up to another year

UK Carphone Warehouse shops set to sling their last phones, 2.9k redundancies hit high street, as Dixons closes all 531 'standalone' sites

CW to live on as a counter in a Curry's, as CEO says: Mobile is 'currently holding back the whole business'

Brits swarm Dixons Carphone for laptops, printers, games consoles, fridges, freezers to weather out COVID-19 storm

Online sales up 72%, but retailer warns of impact of store closures

Dixons Carphone to London Stock Exchange: Yay, we grew 2% in the festive quarter. Oh, hang on, no we didn't

'Clerical error' causes major screw-up... misery loves company at UK's largest 'leccy retailer

Hm. Is it wise to assume 'no material disruption' from 'volatile' UK climate, Dixons Carphone?

Mobile biz is a mess, but we're sticking to revenue guidance

Dixons Carphone top brass take 20% pay cut as swathes of Brit workforce furloughed

Exclusive - updated But outgoing Carphone Warehouse staff can't use government support scheme to defer redundancies

Don't panic: Dixons Carphone's share price crashes 30% after statutory losses hit £329m

CEO talks of 'more pain', 'substantial losses' in Mobile amid industry-wide handset sales meltdown

Biting the hand that feeds IT © 1998–2020