Soon we’ll not be supporting this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Dixons Carphone - A solid end to the year

George Salmon | 24 May 2017 | A A A
Dixons Carphone - A solid end to the year

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Currys plc Ordinary 0.1p

Sell: 132.20 | Buy: 132.40 | Change -2.10 (-1.56%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

Fourth quarter revenues grew 2% at constant currency, with an equivalent increase in like-for-like (LFL) sales. The group has narrowed its profit expectations to £485-£490m, towards the top end of its previous guidance. The shares rose 3.1% on the news.

Our view

Recent trading has been strong, despite unfavourable economic conditions in many of its core markets.

The joint venture in the US with Sprint, a big American network, looks to be emulating the success of Carphone Warehouse's JV with Best Buy Mobile a few years ago. With the Connected World Services division growing rapidly, there is plenty of scope for growth.

Analysts expect earnings per share to grow by over 20% from 2016-19, with the dividend, which currently offers a prospective yield of 3.5%, increasing by around 30%.

However, these are still challenging times for the group, reflected in the fact that the shares currently trade at 10 times expected earnings. Back in 2015, 17x was the going rate.

Sterling's weakness following the vote means the cost of imported goods looks set to rise, which is bad news for most retailers. While we have yet to see much evidence that the gloomier predictions about the UK's economy will prove accurate, any negative impact would surely be felt. After all, big ticket electronic items fall comfortably within the discretionary spending category.

Dixons might be in an enviable position as the last man standing on the High Street, but the threat posed by online retailers, like Amazon and eBay, is a concern. Online competitors have cost advantages; such as lower rent, staff and business rate burdens, which often translate to lower price tags.

Nonetheless, there are still plenty out there who like to try before they buy, and don't mind paying a touch more if they get a bit of help from a friendly and knowledgeable store assistant. If Dixons' in-store service is sufficient to keep customers coming in, and leaving happy, this could yet prove its trump card.

Fourth quarter in detail:

UK & Ireland LFL sales growth was 2%, driven by a strong electricals performance, despite the deferred release of the Samsung S8. As a result of store closures, total revenue dipped 1% in the quarter. The transformation to the 3-in-1 store format is now all but complete.

The group continues to experience headwinds in the Nordic region, although managed to grow LFL sales by 2% in the quarter. The new warehouse at Jönköping is now fully operational and the integration of the Fona business in Denmark is now complete.

Southern Europe enjoyed another good year, with LFL sales up 6% in the year and 5% in Q4. Greece was a particularly strong contributor to this performance, while the group continues to gain market share and improve its service and delivery propositions.

Looking ahead, group CEO Seb James said: "our view is that the UK consumer continues to be active in the market, but we anticipate no let-up in their - very rational - view that price and service are critical factors in deciding where to shop."

Unless otherwise stated, all estimated figures, including prospective dividend yields, are taken from a consensus of analyst forecasts compiled by Thomson Reuters. These estimates should not be taken as a reliable indicator of future performance.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.