Dixons runs the rule over mobile

A late August profit warning revealed a sluggish mobile market, enough to send the shares down nearly a third in a single day’s trading. This was echoed in the half-year results, as chief executive Seb James confirmed more consumers had chosen to hang onto their old handsets rather than push ahead with upgrades when confronted with higher prices and smaller technological advances. Like-for-like mobile sales fell 3 per cent across the UK and Ireland. Add to this the later launch of the iPhone X, which pushed some sales into the second half of the financial year, and the fact that Black Friday and Christmas trading all fall into the third quarter. That hasn’t stopped Dixons from reporting a “record” Black Friday, though.

But there are deeper questions being asked about the viability of Dixons’ mobile business. Mr James admits the performance of the mobile division “needs addressing”, and that the board is “taking action to cement [the company’s] place in a changing world”. An update on what these developments will be is due later in the year, but priorities will include reducing the complexity and capital intensity of the mobile segment, and increasing the “simplicity and profitability” of what the business does. There is expectation in the market that some Carphone Warehouse outlets will have to close.

Elsewhere, the electricals business – which includes those discretionary items that can typically suffer in a consumer downturn – reported a 7 per cent uptick in underlying sales, with growth across all markets and several market share gains.

Analysts at Investec expect pre-tax profit of £394m for the year ending April 2018, giving EPS of 26.6p, compared with £501m and 33.7p in FY2017.