Dixons Carphone's share price drops 20 per cent on profit warning

IFA 2015 Consumer Electronics And Appliances Trade Fair
Dixons Carphone shares plunge on profit warning (Source: Getty)

Dixons Carphone's share price fell nearly 20 per cent this morning as the electronics giant warned profit will be 21 per cent lower this year than last year.

In a trading update the retailer said pre-tax profits for 2017-18 would be £382m, down from £501m last year.

The following year's profit is expected to be even lower at "around £300m".

The company blamed weak demand from mobile phones, noting that like-for-like sales were flat across the year and that gross margins continued to be challenged.

The retailer plans to close 92 stores this year in a bid to cut costs. It said it was not expecting this to lead to large-scale job losses and was hoping to redeploy staff to other stores.

New chief executive Alex Baldock, who joined from Littlewoods owner Shop Direct in April, admitted "nobody is happy with our performance today" - but stressed it was "fixable".

Read more: Dixons Carphone UK boss steps down to lead new energy supply business

He said: “Eight weeks in the business have cemented my optimism about Dixons Carphone’s long-term prospects. I’ve found exceptional strengths, and though there’s plenty to fix, it’s all fixable.”

"We’re number one in each of our markets, with people and capability no competitor can match. Our opportunity lies in making the most of those strengths, which we are nowhere near doing. And we must: nobody is happy with our performance today."

Since joining Baldock has begun a management clear out, forcing out a number of senior directors and simplifying the management structure.

Over the last year the company's share price has fallen from 327p to 223p, having previously gone as low as 145p.

At the time of writing this morning its share price had fallen 19.3 per cent to 188p.

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AJ Bell investment director Russ Mould said Baldock had engaged in a "kitchen sinking" excercise.

“Often when a new chief executive joins a company, particularly if has faced operational challenges or is in a difficult sector, he will look to rebase expectations.

“Eight weeks in to his tenure at electronics retailer Dixons Carphone, chief executive Alex Baldock has followed this playbook to the letter.

“In what can be described as a kitchen sinking exercise, the company is guiding for a significant drop in profit in the current financial year and reveals plans to shutter 92 Carphone Warehouse stores."

Baldock said the new leadership team was aiming to get the business back on track.

“We’re getting on with it, through a new leadership team and structure that’s promoted top talent, cleared away unnecessary layers and silos, and started to speed up decision-making. We’re already giving new impetus to areas crucial to our transformation such as data and analytics, marketing, digital, services and technology,” he said.

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