Carphone store closures ‘significant’ step towards cost saving
Dixons Carphone’s mobile revenue for its 2019/20 financial year decreased by 20 per cent annually.
Revenue for the segment in the 53 weeks up to May 2 2020 was £1.589 billion, down from £1.998 billion the previous year.
It made an adjusted loss of £104 million, compared to a profit of £50 million the year before.
Dixons’ total group revenue for the year was £4.538 billion, an increase on £4.475 billion, but its profit fell from £339 million to £166 million, which it partially attributed to the performance of its mobile division.
In a statement announcing its results, Dixons said: “In UK&I mobile, 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.”
However, it added that the closure of its standalone stores represented a “significant step towards elimination of losses”.
In a conference call discussing the results, Group chief executive Alex Baldock said: “Mobile remains a central category for us in the years ahead. It’s the number one technology for customers and we want to be number one in customers’ eyes for tech, so mobile remains at the heart of that.”
Dixons anticipates further operating loss in mobile this year, as it continues to integrate mobile further into its wider business. Due to the pandemic setting back planned business changes by six to 12 months, it expects to implement loss reduction measures such as its £200 million One Business cost reduction programme and removal of historic mobile Point of Sale systems in the 2021/22 financial year.
“Compared to our Electricals business, our Mobile business has a much smaller share of revenue from online operations and is running on a platform that has deliberately seen little investment over the last two years as it will be integrated into our new platform,” the company wrote.
“Consequently, it has not seen the same sales transfer to online as Electricals during lockdown. Our new Mobile offer will reflect how customers are buying phones and technology while still providing flexibility, transparency and value. But this has also been delayed as we paused system development during the crisis.”
Baldock said: “The first 10 months of the year was a story of delivering on our promises and accelerating the transformation of Dixons Carphone. We gained market share online as well as in stores, grew Credit and Services, drove big improvements in customer satisfaction, took difficult but essential decisions such as closing our UK standalone mobile stores, and were on track to meet financial expectations.
“With Covid-19, our immediate priorities abruptly changed to keeping everyone safe, helping our customers and securing our future. Our colleagues have delivered on all three, and I thank every one of them for the skill and determination with which they’ve responded.
“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.”
Dixons’ online sales increased by 22 per cent, including a 114 per cent rise in April as lockdown took hold. Baldock said that popular categories included gaming, cooking and home working devices.
Group chief financial officer Jonny Mason revealed that the company had benefited from £16 million in furlough money, having put around 14,000 employees on the scheme.
However, this is not the total extent to which Dixons Carphone used the furlough scheme, as it has run past the end of the financial year.
Baldock added: “The crisis has set back our transformation by six to 12 months in places, but it was working before the crisis hit, it’s had a stress test, we’re coming through it strong and we intend to resume our transformation after it.”