Dixons Carphone has warned that more expensive mobile phones, a weak pound and scrapped EU roaming charges will damage the company’s profits. Chief executive Seb James said that the more expensive costs means that customers are not upgrading their phones as frequently. As a result the company has had to adjust its business plan to make up for the likely losses.
“Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been more incremental,” James said. “As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year. Over the longer term we believe that the postpay market will largely return to normal but in the meantime we have taken a conscious decision to invest in our margin and proposition to maintain market share and scale so we remain in a strong position as the market leader when this happens.”
He added: “Whilst this investment will cause a shortfall in profits for our phone business we do however expect overall profit in our core retail operations to be in line with last year supported by good progress in our UK & Ireland, Nordic and Greek electrical businesses.
But it is not all doom and gloom at Carphone Dixons, with sales in the electrical business on the up. James also predicts strong sales figures for the Iphone 8 is released this autumn. James said: "We’re anticipating that iPhone 8 launch will be much better, maybe not as good as the iPhone 6, more like the same numbers as the iPhone 6S. We think the iPhone 8 is a better phone and we will see our customer base returning."
He added: “As we highlighted at the full year results, we have, over recent years, reported a number of one-off adjustments, particularly related to our large mobile network debtor. Historically these items have mostly been net positive to the business, but, largely caused by changes in EU roaming legislation, we now believe that the outcome is likely to be net negative this year. While it is difficult with the limited data currently available to assess the precise impact of these changes, we currently estimate that the net negative effect will be a range of between £10m and £40m this year. In total, the one-off adjustments contributed a net positive, and largely non-cash, effect of £71m last year.”
Shares fell more than 30 per cent after it said profits this year would be £360m to £440m, down from £501m last year.