Dixons Carphone profits slump following Covid store closures

In the 53 weeks to 2 May, adjusted pre-tax profit fell to £166m from £339m in 2019. This was around £44m below the guidance that Dixons reiterated in January, which it said it was on track to achieve before the Covid-19 outbreak. However, it was ahead of consensus expectations of £151m.

UK & Ireland electricals revenue ticked up 1% to £4.54bn, but mobile revenue slid 20% to £1.59bn.

In the UK & Ireland mobile division, the company said adjusted EBIT losses in 2020/21 are expected to be slightly worse than 2019/20 due to impact of the virus outbreak on trading and as a result reaching breakeven six to 12 months later than previously anticipated.

Dixons said online sales rocketed 166% in April amid the lockdown, and were up 22% over the year as a whole.

The company said it has more than £1bn of liquidity headroom at year-end, providing "security against downside risk and confidence to invest".

Chief executive Alex Baldock said: "Since the year end, all our electricals businesses have continued to grow sales. Where our stores have reopened we've performed well, while continuing to see strong online sales growth. That said, we expect a weakening of consumer spending later this year and are being cautious in our planning."

The company said it was not issuing guidance on electricals sales or profits for 2020/21 "due to the high levels of uncertainty".

At 1340 BST, the shares were down 9.1% at 78.60p.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, noted the jump in online sales and said: "Nations desperate for home office equipment and extra food storage clearly came in handy."

However, she also pointed out that online sales are lower margin, "which compounds an existing problem because operating margins are already a little thin".

"The other thing to consider is spending patterns in the coming months. Customers may have splurged on their at-home set ups, but as the economic outlook gets gloomier by the day, it’s fair to assume that discretionary spending is going to be pinched. That will hurt Dixons’ top line, and one way to help mitigate that is through discounting prices - but that would compound the existing margin problem.

"One of Dixon Carphone’s key advantages is that it can offer a face-to-face service, which is a real USP when it comes to flogging technology. However, if social distancing becomes the norm, this model could be undermined."