Entering into a £3.7bn merger is no small thing, but any residual doubts Dixons Retail or Carphone Warehouse had about their tie-up last year have long since been put to bed. Nearly a year into the merger, Dixons Carphone continues to beat expectations, reporting a 9% rise in like-for-like revenues for the 17 weeks to May 2.
The marriage was blessed barely a month in by the collapse of rival Phones4u, and it’s still reaping the benefits. Dixons Carphone hopes to have opened 280 new mobile stores in its first full year, and is averaging four new Carphone Warhouse concessions within Currys PC World stores a week. All this has helped UK and Ireland revenues rise 13% this quarter and 8% for the year.
At the same time, a strange turnaround has occurred in southern Europe, which was the only trouble spot for the group in its first six months. Revenues rose 8% in the quarter (although they still fell 5% in the full year), driven by strong like-for-like performance in Greece. Grexit crisis? What Grexit crisis?
The group expects its rising sales and cost-cutting ‘synergies’ – it hopes to have integrated its UK, Swedish and Irish head offices by the autumn – to result in pre-tax profits ‘slightly above’ £375m, its previous upper estimate.
It’s all rosy for Dixons Carphone then - for now. The benefits from the demise of Phones4U will not, after all, last forever. At the same time the rise of ‘quad play’ threatens its phone business, as all those customers buying landline-broadband-TV-mobile network bundles might also decide to buy a phone while they’re at it. Dixons Carphone boss Sebastian James isn’t just taking it lying down, however.
‘It is a truism that the time to fix the roof is when the sun is shining, and we will pursue continued investment in the business this year to do just that,’ he said. Aside from the concessions in Currys PC World stores, which have created a different kind of bundle (if you can pick up a phone with your broadband subscription, why can’t you pick one up with your flatscreen TV?), the group is also responding by getting into quad play itself.
In Spain, it distributes Movistar’s bundles, which it says has improved trade in tough conditions there, and it’s also launched a white label mobile network worldwide, iD.
This may not be enough to prolong the honeymoon, but it could help smooth over rocky patches further down the line. Oddly, despite the positive results, investors were nonplussed. Shares in Dixons Carphone fell 1.8% to 470.9p this morning, though that’s still 40% higher than the list price when the two got together.