Dixons warns on profits as mobile market bites

It revised full-year pre-tax profit guidance to between £360m and £440m despite positive like-for-likes in many markets.

This marks a stark contrast with its last full-year, when it unveiled record profits in a transformational year.

UK first-quarter like-for-likes were up 4% while sales rose 1%. The Nordic countries and Greece put in stellar performances with total sales up 17% and 16% and like-for-likes up 8% and 6% respectively.

Overall, total group sales were up 6%, as were like-for-likes for the 13 weeks to July 29.

Boss Seb James hailed a good performance in electricals in many markets but said the UK phone market was “challenging”.

Handset impact

James said: “Over the last few months we have seen a more challenging UK post-pay mobile phone market. Currency fluctuations have meant that handsets have become more expensive while technical innovation has been more incremental.

“As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year.

“Over the longer term we believe that the post-pay market will largely return to normal, but in the meantime we have taken a conscious decision to invest in our margin and proposition to maintain market share and scale so we remain in a strong position as the market leader when this happens.”

He added that recent changes relating to its Honeybee programme and EU roaming legislation had also had a negative effect but said that he believed that selling Honeybee as a service rather than a product would create a more sustainable, higher-value business in the long term.