Dixons Carphone warns of "weakening" spending this year as profits tumble
Dixons has warned that it expects a “weakening” in spending later this year as it posted a surge in online sales during lockdown, but a fall in annual profits.
The retailer reported profits in the 53 weeks to May 2 fell to £166 million from £339 million the year before, as the impact of store closures during lockdown and troubles in its mobile division hit earnings.
Overall UK and Ireland sales rose 1% to £4.54 billion, but group sales were down 3% at £10.17 billion. The results are ahead of City estimates, but the company has not declared a final dividend.
Dixons saw an eye-watering 166% upsurge in online sales in the UK and Ireland in the first few weeks of lockdown as shoppers hunted for laptops, bread makers and gaming equipment to make working and living at home constantly more bearable. Hair clippers were also popular, with hairdressers forced to shut. Overall annual sales rose 22%.
It Carphone Warehouse mobile division continues to prove a headache. The company said: “trading was worse than expected after the closure of all our small standalone shops due to the enforced closure of all our other UK stores and low sales transfer to the online business”.
Dixons Carphone group chief executive Alex Baldock said: “Since the year end, all our electricals businesses have continued to grow sales. Where our stores have reopened we've performed well, while continuing to see strong online sales growth. That said, we expect a weakening of consumer spending later this year and are being cautious in our planning.”
Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said. "We're concerned the initial website frenzy as people stocked up on extra freezers and homeworking equipment may have simply taken future sales.”
She added that the switch in balance away from stores and towards online could mean margins have been eroded.
She said low profits and cash flow could end up delaying the return of the company's dividend, which was suspended when Covid-19 hit.
The results mark the end of a turbulent financial year for the business, which was fined £500,000 in January for a massive data breach that compromised the details of 14 million customers.
Just two months later - and just before lockdown - the company announced it would close all of its standalone Carphone Warehouse stores in the UK. The move cost 2,900 people their jobs at 531 sites across the country.
Some 1,800 members of staff were moved to other shops but were rapidly sent home as the business put more than 16,500 employees on furlough when the pandemic and lockdown hit.
