A recent rally at electrical goods-to-mobile phones seller Dixons Carphone (DC.) continued on Tuesday, the shares sparking up 4.1% to 148.28p on news of a strong Christmas performance in terms of ‘sales, market share and customer satisfaction’.
The absence of a further profit warning from the Currys PC World-to-Carphone Warehouse brands owner, whose challenged mobile business performed in line with muted expectations, engendered confidence that the retailer’s tricky turnaround is on track.
Dixons Carphone also generated creditable 3% like-for-like growth in the International business, where it has a growing market leading position in the Nordics and saw 6% growth in Greece.
GOOD PEAK, BUT MARKET WEAK
‘We’ve had a good Peak in a weak UK market and we’re on track to deliver what we promised for this year, and with our longer-term transformation,’ assured Dixons Carphone’s chief executive Alex Baldock.
He is sticking with the full year 2020 adjusted pre-tax profit guidance of ‘around £210m’ outlined with the half-year results.
In terms of the festive performance, Dixons Carphone reported 2% like-for-like sales growth in the UK and Ireland electricals business over the 10 weeks ended 4 January.
This robust showing reflected strong sales of everything from supersized TVs and the Nintendo Switch to Shark vacuum cleaners and wearables like Fitbit and Apple Airpods.
In a market down over 3%, Dixons Carphone delivered accelerated market share gains both in-store and online; this is encouraging because growing the online business is one of the pillars of Baldock’s turnaround plan.
WINNING THE BATTLE
Meanwhile, Dixons Carphone’s new ‘Gaming Battlegrounds’ demonstrated the potential of immersive store experiences and drove strong sales and share gains.
Baldock added: ‘Peak saw us continue to invest in our strategic initiatives with encouraging results.
‘Credit and services adoption rates increased, online sales grew strongly, and our newly remodelled stores performed well. Coupled with our unambiguous “You won’t get it cheaper. Full stop” price promise, alongside better availability and delivery, this led to big improvements in customer satisfaction and strong market share gains in electricals.’
MOBILE REMAINS A DRAG
In the UK & Ireland mobile business, like-for-like revenues were down 9%, but this is a trough year for losses in the struggling mobile operation, which remains a real drag.
Rather than upgrading handsets on a frequent basis, people are holding on to their phones for longer while opting for less lucrative SIM-only contracts, although the retailer has previously said mobile should at least break-even by the 2022 financial year.
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould commented: ‘In the context of Dixons’ recovery story, having everything apart from mobile move forward in terms of sales growth is still a positive result.
‘A pick-up in the housing market, as evidenced by the latest Rightmove survey, bodes well for Dixons as buying a new TV might be a natural purchase when moving home. Any improvement in consumer confidence would also work in Dixons’ favour.
‘High levels of employment and relatively low levels of inflation in the UK certainly provide a more favourable backdrop for increased consumer spending. While that hasn’t yet been reflected in retail sales figures, some clarity on how Brexit might play out could be the boost desperately needed by the nation’s shopkeepers.’
