ii view: Electricals up, mobiles down at Dixons

Retailer Dixons Carphone is pursuing a recovery plan, but have mobile phone sales troughed yet?

First-quarter trading update for 13 weeks ending 27 July 2019

• UK & Ireland electricals like-for-like revenue up 2%
• International like-for-like revenue up 4% - Nordics up 4%, Greece up 7%
• UK & Ireland mobile like-for-like revenue down 10%
• Full-year guidance remains unchanged

Chief executive Alex Baldock commented:

"We're on track with both our trading this year and our longer-term transformation.

In Electricals we continued to grow and win market share in all territories and customer satisfaction further improved. The mobile market is as challenging as expected, underlining the need for the decisive actions that we set out in June. We remain committed to growing Electricals sales and headline profits in UK & Ireland and International this year, and to this being the trough year for Mobile losses.

"Our longer-term transformation is also on track. We made further gains in our big priorities of Online, Credit and Services. The current political and economic climate is volatile but, assuming no material disruption from that, we stand by our full year guidance. “

ii round-up:

UK and international consumer electrical and mobile phone retailer Dixons Carphone (LSE:DC.) employs over 42,000 people across nine countries. 

Its brands include Currys PC World and Carphone Warehouse in the UK & Ireland, Elkjøp, Elgiganten and Gigantti in the Nordics and Kotsovolos in Greece.

For a round-up of this trading update, please click here.

ii view:

For investors, the fall in the share price over the last year is a bleak reminder of the company's current challenges – down more than 25% over the last year alone. The potential benefits from a five-year transformation plan are as yet difficult to see, while the loss of its online market share compared to its store share may never be recovered. 

Carphone's network independence has been valued by consumers in the past, however. The electricals business is making progress, while the valuation appears undemanding – a forward price/earnings (PE) ratio comfortably below the 10-year average. Furthermore, a prospective dividend yield of around 6% and covered twice by earnings potentially compensates patient, but arguably those investors with a much higher risk tolerance. 

Positives

• A five-year transformation programme underway
• Geographically diverse – 40% of sales & profits generated outside UK & Ireland
• Investments to incentivise staff of at least £1,000 of shares

Negatives

• Network provider contracts expected to lose money at the mobile business
• Online market share below its store share - rivals like Amazon have muscled in
• Dividend previously rebased - payment cut by 40%

The average rating of stock market analysts:

Buy