Reality strikes Dixons Carphone's profits after laughing off Brexit threat

Punters are putting off handset refreshes as prices rise

By Paul Kunert

Posted in The Channel, 24th August 2017 11:53 GMT

Pricier smartphones and lower EU roaming charges will dampen Dixons Carphone's bottom line, the retailer's CEO warned today in an unscheduled trading update that sent its share price crashing by 30 per cent.

The company had dismissed the Brexit effect on its business in previous communications with investors some months ago, despite tech vendors including Dell, HP and Lenovo raising prices due to the weakened state of the British pound relative to the US dollar.

But DixCar boss Seb James told the London Stock Exchange this morning that in recent months it had noted a "more challenging" mobile phone market caused by rising prices.

"Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been incremental. As a consequence, we have seen an increased number of people hold on to their phones for longer," James said in a statement.

The life of handsets is being extended by four to five months, he claimed, and it was unclear at this stage if launches of new devices from major brands or the "natural lifecycle" of phone purchases will reverse the trend.

"We believe now it is prudent to plan on the basis that the overall market demand will not correct itself this year."

The launch of Apple's iPhone 8 is expected to be more fruitful than its direct predecessor but perhaps not as much of a pull as the sixth generation. The shiny new Samsung Note 8, launched yesterday, will have much less impact.

"We don't think the Note 8 is causing an enormous amount of disruption in the market," he said on a conference call.

From June, EU legislation meant people were able to call, text and use mobile data at no extra cost regardless of the EU country they visited. This change is also expected to hit DixCar's profits.

"Whilst 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 to £40m this year," said James.

First quarter revenue was up 6 per cent at group level; this included a rise of 1 per cent in the UK; growth of 17 per cent in the Nordics; up 16 per cent in Greece, and a 24 per cent decline in the Connected World Services unit. ®

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