21st Jan 2015 08:41
LONDON (Alliance News) - Shares in Dixons Carphone PLC rose Wednesday after the recently merged electronics retailer said Christmas trading was like a "roller-coaster", but said market share gains and good sales growth over the key festive season have left it confident of delivering a full-year profit ahead of market expectations.
Dixons Carphone shares were one of the best performing in the blue-chip FTSE 100 index in early trading Wednesday, up 1.8% at 450.00 pence.
The group, formed from a merger of Dixons Retail and Carphone Warehouse in the summer last year, said UK and Ireland like-for-like sales were up 8% over the nine weeks to January 3 from the year before. In Northern Europe, like-for-like sales were up 6% on the year, but in Southern Europe they fell by 4%.
Overall group like-for-like sales were up 7%, which the electronics retailer said was driven by further market shares gains across electrical and mobiles in the UK and Ireland, Nordics and Greece - boosted by the benefit of Phone4U's demise and new product launches, such as the iPhone 6. Dixons Carphone said its pricing, service and range improvements are all helping gain market share.
"The strange shape of this year's Christmas trading was something of a roller-coaster, but I am very pleased with the end result. In all of our largest trading markets, we have excellent like-for-like performance against fairly tough comparables. At the same time, we have also experienced stable gross margin," said Chief Executive Sebastian James in a statement.
Echoing similar comments from other retailers, Dixons Carphone said that the US-inspired heavy promotional 'Black Friday' kicked off the Christmas season at the end of November, delivering record sales. However sales dipped in the weeks that followed, before picking up again during the Boxing Day sales.
"There is no doubt that the huge scale and success of our Black Friday promotion impacted the three weeks that followed, but it was good to see customers respond positively to the deals that we had on Boxing Day where we saw growth from our record-breaking numbers last year in both the UK and Nordics," James said.
Dixons Carphone said that with the peak time of the year now behind it, it is "comfortable" with delivering a pro forma headline pretax profit ahead of market expectations in the range of GBP355 million to GBP375 million. Headline results exclude amortisation of acquisition intangibles, exceptional items and other one-off costs.
Ahead of the company's trading statement, analyst consensus was for the retailer to report a pretax profit of GBP354 million for the year.
"This includes continued price and service investment as well as, of course, the impact of the decline in the value of the Norwegian krone which affects us negatively in sterling terms," said James.
Cantor Fitzgerald raised its underlying pretax profit expectations for the retailer following the upbeat trading statement to GBP370 million for the current financial year from a previous forecast of GBP348 million.
Investec Securities analyst Alistair Davies upgraded his annual profit forecasts by 10% for this year and 8% for the following financial year, to GBP371 million and GBP443 million, respectively.
"Careful planning and tactical promotions have enabled Dixons Carphone to deliver a strong Christmas trading performance, with the business taking profitable market share through Black Friday. Trading across the group has remained robust in Northern Europe with the more benign competitive environment continuing," Davies said.
Dixons Carphone's James highlighted a trend shift in the way customers choose to shop and when.
"There have been some market shifts as product lifecycles and ways of buying change: online has risen as a proportion, with excellent growth in both home delivery and click-and-collect," he said.
Dixons Carphone said pay-as-you go mobile phone sales continue to fall, while phone contracts continue to rise.
"We have seen a return to growth in laptops, but tablet sales fell sharply as we saw less innovation in the category. We have seen excellent growth in ultra-high-definition TVs as people, rightly, trade into the newer technologies. Finally, white goods had a very good peak trading period across the board with particularly rapid growth in online," James said.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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