Electricals retailer Dixons Carphone (DC.) today warned it won’t meet previous guidance for 2019/2020 profits and debt due to the coronavirus pandemic, which has forced the closure of its stores in the UK and Greece.
Yet the shares rose 4.3% to 81.3p early on Thursday as Dixons Carphone flagged up a boom in online sales over the past fortnight as people shopped ahead of a potentially prolonged period of working from home.
‘Early signs are that this strong trading has continued since stores closed and will help to compensate for lost store sales,’ assured the retailer.
PROFIT WARNING AND PULLED GUIDANCE
Previous guidance was for adjusted pre-tax profit of £210m and lower net debt year-on-year. Unfortunately, the £400m of lost sales it foresees from physical stores now shut will mean a significant hits to Dixons Carphone’s full year profitability and cash position.
In line with government guidance, Dixons Carphone pulled down the shutters on its stores across the UK and Ireland from 24 March. This followed closures in Greece from 18 March, although at present almost all of its stores in the Nordics are open.
Dixons Carphone also said it will not update current year or medium-term guidance until the impact of COVID-19 becomes clearer.
ONLINE SALES BOOM
During the 11 weeks from 5 January to 21 March, group-wide electricals like-for-like sales grew by 8%. This included a strong recent uplift, with electricals like-for-like sales growth running at 23% in the last three weeks.
‘Online trading has been very strong in all countries over the last two weeks as people have been preparing to work from home and use essential technology to continue their lives during the coronavirus outbreak,’ explained Dixons Carphone, which has seen ‘very good sales of equipment for home working (laptops, printers), for home entertainment (TVs, gaming) and for home living (fridges, freezers, kitchen appliances).’
CASH CONTROL MEASURES
In common with businesses around the world, Dixons Carphone is implementing cash control measures to ensure it survives the unprecedented crisis. These include reducing non-essential and capital spending, pruning back orders of new stock and ‘moving mostly to monthly rent payments, in line with many others in the retail industry’.
As for the shareholder reward, Dixons Carphone will consider whether it is prudent to pay a final dividend at the full year results when it has ‘a clearer view on the scale and duration of the impact of COVID-19 on the business’.
‘In the UK we expect to lower costs at a rate of over £200m per annum from the suspension of business rates and the support of our colleague salaries,’ added Dixons Carphone, whose shares sparked up at the start of last week after it announced the next step in its turnaround strategy for the struggling UK mobile business.
All of the company’s 531 standalone Carphone Warehouse stores will shut from the beginning of April, resulting in the loss of 2,900 jobs, with customers replacing their handsets less often and shopping for more flexible bundles, resulting in lower footfall to standalone stores.