Dixons Carphone reports mixed results
Ken Odeluga September 9, 2014 3:21 PM
<p>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 […]</p>
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.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.