UK cellphone seller Dixons Carphone blames fall in pound after Brexit for the slump in profits

Shares in Dixons Carphone, one of Britains top sellers, slumped Thursday after the company warned that its profits this year would be lower than expected.

Shares in Dixons Carphone PLC, one of Britain's most visible high street brands, slumped Thursday after the company warned that its profits this year would be lower than expected, largely because the fall in the pound since last year's vote to leave the European Union has prompted customers to hold on to their handsets for longer.

Representative Image

Representative Image

In morning trading in London, Dixons' share price was down 23 percent at 1.75 pounds, meaning the company now has a market value of barely 2 billion pounds ($2.6 billion). So far this year, the company has lost around a half of its value largely because of Brexit-related concerns.

Since last year's Brexit vote, the pound has fallen by around 15 percent against its main competitors, including the dollar. That has stoked inflation by making imports more expensive, which has eaten into household incomes and prompted consumers to take a more cautious approach to spending.

In a statement, the company said it has seen a "more challenging'' environment in the British cellphone market as a result of currency fluctuations that have made handsets more expensive and a slower pace in technical innovation.

"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 life cycle 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,'' Chief executive Seb James said.

Dixons also said that the scrapping of roaming charges within the 28-country EU would dent profits to the tune of 10-40 million pounds this year.
Despite some bright spots including strong sales in the Nordic and Greek operations, the company said it now expected that its headline pretax profit for the 2017-18 financial year will be in the range of 360-440 million pounds.

That compared with last year's equivalent of 501 million, a figure that most analysts had previously thought it would get fairly near to.
Dixons will be hoping upcoming launches from Apple and Samsung will help improve its core British business, especially if the pound doesn't recover from its post-Brexit losses soon.

"The forthcoming generation of Samsung Galaxy and iPhone handsets claim to make big steps forward, but recent history hasn't delivered much that's revolutionary,'' said Nicholas Hyett, an analyst at Hargreaves Lansdown. "Seb James will be hoping Tim Cook (Apple's CEO) has something big up his sleeve.''

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