Dixons Carphone shares nosedive on profit warning

Dixons Carphone has warned of a steep fall in profits this year, as customers hold on to their phones for longer after the weaker pound pushed up the price of new handsets.

Dixons Carphone, which owns Dixons and Carphone Warehouse, told investors to expect pre-tax profit of £360 million to £440 million this year.

The group reported profit of 501 million pounds in the year to 29 April, and analysts had expected a similar number this year.

Dixons Carphone, the owner of Carphone Warehouse and Dixons, has become the latest United Kingdom giant to issue a profit warning, causing its share price to slump 30% in early morning trading.

Dixons Carphone shares dropped as much as 25 percent in early trading, the most since the company was formed in a merger three years ago.

Chief executive Seb James said that the more expensive costs means that customers are not upgrading their phones as frequently.

The weakness in the market will not be over the long term and the company is optimistic that Apple's introduction of the iPhone 8 is going to be a catalyst for more growth, said the CEO.

UK RETAILER Dixons Carphone issued a profits warning, blaming the expected dip on Brits" increasing resistance to pay premium prices for "flagship' smartphones. Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been more incremental.

Neil Wilson, senior market analyst at ETX Capital, said the profit warning stoked fresh fears about the health of the United Kingdom retail sector.

"The cause of that really is that people are holding on to handsets longer, on average we are seeing four to five months longer", he said.

"US ad spend might come back if Trump growth hopes are delivered, and consumer goods companies may increase spend again but structural concerns remain", analysts at Investec said in a note, as quoted by Reuters. James also predicts strong sales figures for the Iphone 8 is released this autumn.

"We're anticipating that iPhone 8 launch will be much better, maybe not as good as the iPhone 6, but more like the same numbers as the iPhone 6S, as opposed to the disappointing sales of the iPhone 7".

  • Eleanor Harrison