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Dixons Carphone takes share in mobiles

The retailer is taking mobile phone market share and growing its sales of electronic goods
September 15, 2015

What's new:

■ Like-for-like first-quarter sales up 8 per cent

■ Mobile and electrical markets strong

■ Weak competition from Home Retail

IC TIP: Buy at 423p

Dixons Carphone (DC.) chief executive Sebastian James welcomed a quarter of "excellent growth" at the electronics and mobile phone retailer, which saw group like-for-like revenue jump 8 per cent in the 13 weeks to August.

Spearheading the increase was strong momentum in the UK and Ireland, where like-for-like sales jumped by a tenth. This was despite a tough comparator in 2014, when the World Cup helped boost sales of televisions. In fact, Dixons managed to grow sales of UK electrical goods in the period, while taking market share in mobile phone sales.

The other significant development for its telecoms division was the agreement signed with US network provider Sprint to launch as many as 500 outlets Stateside. The joint venture is progressing well, according to Mr James, with the first of at least 20 stores opened this month.

In Europe, sales were up 4 per cent in the Nordics, despite soft currencies and the impact of the weak oil price on the Norwegian economy. Like-for-like revenues were flat in southern Europe "despite challenging markets", although the company reported stronger trading in Spain and sales growth in Greece.

 

Barclays says...

Buy. The contrast between Dixon Carphone's results and those of Argos operator and rival Home Retail (HOME) is stark. The latter will be disproportionately hit by UK wage inflation, while Dixons will grow its share in a relatively uncompetitive market thanks to sharper pricing and better service. Cost savings from last year's merger should continue to drip down into profit, while the deal with Sprint should add £26m to operating profit by 2018, supporting our forecast for 11 per cent compound annual growth for the next three years. The company remains our top general retail pick in a depressed sector. Buy.

 

Canaccord Genuity says...

Buy. Sales growth is being driven by strong demand for 4K televisions, fitness devices and smart home devices, and we note the introduction of the Apple watch to more than 100 stores by the end of October. Dixons has started the year strongly, but continuing that performance for the rest of the calendar year will depend on good trading during the new phenomenon of Black Friday as well as Christmas. Last year's figures benefited from the launch of the iPhone 6 and the collapse of Phones4U, but short-term earnings growth should come through further synergies.