Dixons to shutter 92 UK Carphone Warehouse shops after profit warning

Dixons Carphone is to close 92 of its 650 stores following a profit warning this morning which sent shares tumbling 20 per cent.

The firm expects pre-tax profits to be £382m in its 2017/18 results out next month, but already predicts profits to fall to £300m in 2018/19. In contrast, for 2016/17 it reported profits of £501m.

Over the last year, the firm has been particularly hit by the trend of customers skipping mobile upgrades – profits fell 60 per cent in its half-year to December 2017.

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Alex Baldock, who stepped in as chief exec in April taking over from ex-Etonian Seb James, said: "Though there's plenty to fix, it's all fixable."

He added: "Right now, with our international business in good shape, we're focusing early action on the UK. In electricals, we're focused on gross margin recovery.

"In mobile, we're stabilising our performance through improvements to our proposition and network agreements. In both, we'll work hard to improve our cost efficiency. We won't tolerate our current performance in mobile, or as a group. We know we can do a lot better."

Dixons also said it was budgeting for a contraction in the UK electricals market. "We expect some cost increases in UK electricals, notably National Living Wage and IT depreciation, partially offset by gross margin recovery initiatives, including range optimisation, better availability and reduced levels of markdown."

But it added that it planned to "correct recent underinvestment" in both its "colleague and customer proposition" and will plough £30m into these areas in the UK and Ireland, which it reckoned will give staff "the right tools and the customer an improved experience".

It said the "planned closure of 92 Carphone Warehouse standalone stores" was "early action" due to an expected drop in gross margins.

Kester Mann, analyst at CCS Insight, said: "Some of Dixons' challenges have been well documented for some time.

"So it doesn't come as a great surprise to continue to find headwinds in their business, with the company repositioning itself in response to market conditions. Specifically the move to SIM-only, customers not replacing handsets, and continuing challenges on high street."

A number of high street stores have this year either gone into administration, such as Maplin, or announced store closures, including big names such as M&S, as customers seek better deals online. ®