Dixons Carphone shares plunge after the company warns of 'uncertain times'

The company’s stock has fallen by a third this year, amid fears a weaker pound will push up import costs

Zlata Rodionova
Wednesday 14 December 2016 13:56
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‘Sterling’s weakness means the cost of importing its electronic goods will rise, and the group could find itself between a rock and a hard place’
‘Sterling’s weakness means the cost of importing its electronic goods will rise, and the group could find itself between a rock and a hard place’

Shares in Dixons Carphone, the UK’s biggest electrical retailer, plunged by more than 5 per cent after the company warned it was preparing itself for tougher times in the months ahead, following the UK’s vote to leave the EU.

The company’s shares slipped despite the fact that it reported a profit increase of 19 per cent. In the six months to 29 October, pre-tax profits climbed to £144m while sales rose 4 per cent to £4.9bn.

Sebastian James, chief executive, said the firm had seen no effect on consumer demand as a consequence of the Brexit vote, but was planning for “more uncertain times ahead”.

He added that the company was focusing on reducing costs, which includes plans to shut 134 shops.

George Salmon, an equity analyst at Hargreaves Lansdown, said Dixons Carphone’s strong results mask the “threat” of potential challenges brought by the Brexit vote.

He said: “We have yet to see if the gloomy predictions about the UK’s economy are accurate, but any negative impact would surely be felt by the group. After all, big-ticket electronic items fall into the discretionary spending category.

“In addition, even if the economy remains resilient to the shock of leaving the EU, the threat of rising inflation hangs over the group.

“Sterling’s weakness means the cost of importing its electronic goods will rise, and the group could find itself between a rock and a hard place.”

The company’s stock has fallen by a third this year, amid fears a weaker pound will push up prices for electrical goods and affect demand next year.

Mr James said: “In particular, we have been focusing on ... identifying areas of potential market share growth if the world becomes a tougher place for our competitors,” he said.

“We are also planning our offer so that potential currency impacts are minimised for the customer.”

Dixons Carphone, which was formed in a £5bn merger in 2014 between Dixons and Carphone Warehouse, employs 42,000 staff in the UK and overseas.

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