Dixons Carphone reports mixed results

Dixons Carphone, the UK consumer electronics retailer recently selected for a return to the benchmark FTSE 100 index, has reported a mixed set of first-quarter trading figures.

The firm resulting from the merger in August of mobile phone retailer Carphone Warehouse Group and electronics specialist Dixons Retail said its integration is progressing well.

Whilst Dixons Carphone noted its UK electricals business made a strong start to the year, helped by The World Cup and an improving consumer environment, the group noted like-for-like sales at Carphone’s CPW business were down 6% in the four months to Aug. 2, versus a consensus forecast of a 5.8% fall. Like-like-sales are retail figures excluding results from stores open less than a year.

The trading period ended before completion of Dixons Carphone’s merger.

Putting Carphone’s sales fall in perspective

The weaker like-for-like performance follows seven-consecutive quarters of growth and comes amid strong comparable figures in the same period a year ago.

This puts what appear to be soft results today in a wider context. In perspective, the first-quarter results may not be as weak as they appear given the stronger basis from the same period a year ago.

Sales at Dixons Retail’s UK Ireland stores open more than a year rose 4% in the three months to July 31 – slightly better than the average of analyst forecasts foreseeing a rise of 3.8%.

The company attributed the sales growth to World Cup television sales, promotions and consumer recovery. In the Nordic region, Dixon Retail’s like-for-like sales were up 1% compared to a consensus forecast of a 0.8% rise and 6% higher in Greece, against consensus of 2.5%.

“I am pleased to report a good start to the year and to our new shared enterprise,” Dixons Carphone chief executive Sebastian James said.

“The integration is going well with seven departments now serving both parts of the business in an integrated way and, although it is early days, our 11 stores-in-store are performing ahead of the business case that we set out in our merger announcement.”

The market is reacting moderately well to this morning’s earnings although the stock price adjustment to account for the combined stock of erstwhile Dixons Retail and Carphone Warehouse Group is beginning to appear ‘toppy’.

The stock trades 0.8% higher at 372.3p having been as much as 1.7% up earlier today.

Dixons Carphone appears to need more time to sort out an adequate shareholder returns policy, because at present, its forward yield of 1.9% doesn’t seem fit for purpose compared to rivals averaging 4.1%.

Free cash flow for the year to March 2014 amounts to £382m, on the face of it giving scope for a better yield.