There will be closure of almost 100 Carphone Warehouse stores this year as the retailer – under its new boss, Alex Baldock, has issued a profits warning and has promised to take measures so that the company is able to cope with and adapt to the changing trends in the mobile phone market.
Driven by a change in consumer habits and enhanced costs of operations, this year, 92 Carphone Warehouse standalone stores will be shut by the company, Dixons Carphone said.
According to analysts the company could engage in shutting down of more stores as the company is planning to trim down the portfolio of the more than 700 standalone Carphone stores that it now possesses.
“There should be some easy wins in terms of making it leaner,” said Neil Wilson, the chief market analyst at Markets.com.
In the past one year, the shares of the company have plunged more than 30% and fell a further 20% at 185p after the company issued he profits warning which it said would fall to £300m. that number was well below City forecasts of £387m for the year to April 2019.
The company claimed that its profits were pressurized by enhancement in the cost of sourcing goods overseas, increased expenditure because of the rise in the legal minimum wage and a shrinking market for electrical goods.
The warning came as Dixons confirmed profits would crash to £382m in the year to April 2018, 24% down on the £501m made a year before.
The group had also issued a profit warning last summer citing factors such as a drop in the value of the pound because of the Brexit uncertainty and hence analysts had been expecting the fall in the current profit projections. A drop in the pound meant that mobile handsets were made more expensive. The company had also blamed a slowing technical innovation which did not spur consumers to update their gadgets.
Dixon’s performance has been hit because consumers who are already hard pressed are not included to upgrade or change their phones and want to retain their current ones for longer periods of time and are going “sim-only”. While claiming the greater efficiency was the reason for the closure of stores, the group assured that there would be no loss of jobs because of the move as the employees of the closed stores would be given the chance to move to larger outlets close by.
Baldock said: “Though there’s plenty to fix, it’s all fixable.”
He said that the business was not outward looking and was short-termist and “easily distracted by dabbling in peripheral opportunity”. The company now aims to primarily enhance its main UK businesses, which would be partially achieved by close functioning of the Carphone Warehouse and the Currys PC World chains.
“We see stores at the heart of what makes this business distinctive,” he said.
He said: “We won’t tolerate our current performance in mobile, or as a group. We know we can do a lot better.”
(Adapted from TheGuaredian.com)