Dixons Carphone to overhaul its mobile business after profits slump

The group attributed the drop in profits largely to a fall in mobile sales during the first half of its financial year

The later launch of the iPhone X also affected profits (AFP/Getty)

Dixons Carphone is set to scale back its mobile phone operations after seeing its pre-tax profits plummet by more than 60 per cent in the six months to the end of October.

The group, which owns Currys, Carphone Warehouse and PC World, said that it was repositioning its mobile business to deliver a “simpler, less capital-intensive” operation.

The retailer posted pre-tax profits of £61m for the 26 weeks to 28 October, down from £154m for the same period a year ago.

Following the announcement on Wednesday morning, shares in Dixons Carphone went up by more than 7 per cent.

Analysts attributed the rise to the news that shareholders would receive their expected final year dividend, the group’s record Black Friday and the growth of its electrical division.

Dixons Carphone said that it had been hit by a tougher mobile phone market, with sales down 3 per cent in the first half of its financial year.

It said higher handset costs meant customers were holding on to their handsets for longer and choosing to use a SIM contract before buying a new phone.

The late launch of the iPhone X also pushed some sales into the second half of the financial year, the electrical retailer added.

“We recognise that the performance of the mobile division needs addressing, and are taking action to adapt our model in order to cement our place in a changing world,” said group chief executive Seb James.

“We will update the market on these developments in due course, but we believe that we can, over time, reduce the complexity and capital intensity of our mobile business model, and increase the simplicity and profitability of what we do,” he added.

Group revenue on a like-for-like basis, which ignores transactions made in shops open for less than a year, went up by 4 per cent to £4.9bn. This was driven by growth in the Nordic regions and Greece, as well as its electrical division, Dixons Carphone said.

The retailer said its electrical businesses continued to grow, with sales in stores open longer than one year up by 7 per cent.

The group also downgraded its full-year, pre-tax profit forecast, from its previous prediction of between £360m and £440m to between £360m and £400m.

“With over 700 Carphone stores [as part of a] total estate [which is] in excess of 1,000 across the group, there is ample opportunity to rationalise the Carphone estate and improve profitability in mobile while still retaining a dominant market position,” said Neil Wilson, senior market analyst at ETX Capital.

“This ought to go down well with investors, although there remain concerns about how the electrical business will hold up in the face of slowing consumer spending,” he added.