Dixons to shut 92 Carphone Warehouse stores

Dixons Carphone has issued a profit warning for 2018/19 and announced it is planning to close 92 standalone Carphone Warehouse stores this year.

The retailer said it expected the UK electricals market to shrink and would need to invest more in its staff and customer proposition in the year ahead.

In a trading statement issued today (May 29), the retailer said pre-tax profit for 2017/18 would be around £382 million, but would fall to £300m in 2018/19. Shares fell by more than 20 per cent this morning following the announcement.

Dixons Carphone’s total revenue rose by three per cent in the year to April 16, while like-for-like sales were up by four per cent. In the UK, sales grew by two per cent for the year as a whole and by one per cent in the fourth quarter.

Commenting on the business’s performance, group chief executive Alex Baldock, who has been in the role for eight weeks, said: “Though there’s plenty to fix, it’s all fixable”.

He added: “We’re number one in each of our markets, with people and capability no competitor can match. Our opportunity lies in making the most of those strengths, which we are nowhere near doing. And we must – nobody is happy with our performance today.

“We’re getting on with it, through a new leadership team and structure that’s promoted top talent, cleared away unnecessary layers and silos, and started to speed up decision-making. We’re already giving new impetus to areas crucial to our transformation such as data and analytics, marketing, digital, services and technology.”

Mr Baldock said that in electricals, the business was focused on ‘gross margin recovery’. He added: “In the UK & Ireland, Q4 like-for-like growth of one per cent across electricals was delivered against a more subdued market backdrop while maintaining our market-leading share.

“With a softer computing market, our category mix during the year shifted towards consumer electronics and white goods, and online sales saw another year of double digit growth, ahead of the market. The combination of channel and category mix effects were more pronounced in the second half of the year, driving a greater adverse gross margin, due partly to the costs of providing home delivery and installation services.”

Looking ahead, Mr Baldock said that in 2018/19, the retailer would be budgeting for a contraction in the UK electricals market and will use its scale to maintain its market share.

“We expect some cost increases in UK electricals, notably National Living Wage and IT depreciation, partially offset by gross margin recovery initiatives, including range optimisation, better availability and reduced levels of markdown.”

Mr Baldock said that due to a challenging mobile phone market, the retailer would be closing 92 Carphone Warehouse standalone stores this year. It currently has around 700 in the UK.

In the coming year, said Mr Baldock, Dixons Carphone will make an investment of around £30m to improve its colleague [staff] and customer proposition in the UK and Ireland.

•GlobalData retail analyst Eleanor Parr gives us her reaction to the Dixons Carphone announcement here.