Reality strikes Dixons Carphone's profits after laughing off Brexit threat Pricier smartphones and lower EU roaming charges will dampen Dixons Carphone's bottom line, the retailer's CEO warned today in an unscheduled trading update that sent its share price crashing by 30 per cent. The company had dismissed the Brexit effect on its business in previous communications with investors some months ago, …
If the CEO rose through the ranks of a business then you would expect them to have a good grasp of how their business sector works. They might - or might not - be able to gauge the potential effects of a disruptive change in that sector.
If they came from a different business sector then one wonders how quickly they can adjust to the nuances of their new company's business model.
I have seen too many cases of senior management brought in from other companies who merely try to apply their - often failed or inappropriate - strategy from that previous employer.
Re: AC of "If the CEO rose through the ranks..."
I once read some commentator* say most CEOs have just one trick. Their success is determined by how well they can identify a company that needs their trick, and knowing when it's done and time to move on.
* might have been Bob Cringely talking about Lou Gerstner's services-first strategy that worked at American Express and IBM, but I can't find a reference to be sure.
When most of the floor space in your retail outlets is devoted to other things such as White Goods, TV and domestic Appliances.
Would I buy a phone from them? Not on your life
Would I buy any other electrical device from them? Not if I could help it.
Multiply that by a few million and it is easy to understand why your profits are down.
You seem to have forgotten the "Carphone Warehouse" part of the name, which typically operate separate stores dedicated to Mobiles.
Now would I buy a phone from Carephone Warehouse? Probably, as they are usually unlocked and can be on any network.. So you're better of getting one from there, than going directly to the Network operators where you will be tied in.
As for the rest of the losses, not surprised, as the place is a bureaucratic hell-hole, I'm surprised anything ever gets done! Interesting news on the Connected World Services, and great shame (they develop business-2-business software solutions etc), as they've got some awesome platforms and are probably the most agile and "non-corporate" division of the company. I wonder if part of these loses though are down to re-organisation internally, for example a recent acquisition being shifted away from CWS into Dixons..
@mcpharm
That obviously does have some impact, but they make little margins on those physical product, a huge chunk of their income comes from upselling and cross selling services (Just bought a new XBox and TV, surely you want a faster internet connection? or 4K Sky TV?).. In addition, they have quite large international operations.
"You seem to have forgotten the "Carphone Warehouse" part of the name, which typically operate separate stores dedicated to Mobiles."
They've already shut a large number of standalone stores and will be turning many of their Currys PC World superstores into a 3-in-1 - standalone CPWs will only exist where there's not a CPCWCPW within a sensible distance. You can expect this to ramp up a little to save costs, there are still retail parks that have a CPW and a CPCW at opposite ends which won't last long.
"Now would I buy a phone from Carephone Warehouse? Probably, as they are usually unlocked and can be on any network.. So you're better of getting one from there, than going directly to the Network operators where you will be tied in."
Sadly, the opposite is true. Buy from CPW and you're tied into a 24 month contract - having to buy yourself out of airtime and handset if you want to leave early.
Buy from O2 and you can pay the device off and walk away, there's no 24 month contract on the airtime. Sky do similar, and Gifgaff follow a similar model - creating a credit agreement for the phone, and a separate airtime plan. O2 also unlock the device for free on request - not sure about other networks but they were happy to supply a code for my Huawei after 3 months, which I then sold as unlocked.
The environment inside a CPW is that of desperate sales. Their conversations are all about spending as much as possible rather than being genuinely helpful.
Pretty sure CPW were doing 24 month contracts, with airtime and handset paid for as one, 2 years ago....
You're very much tied in unless you can stump up for the whole 24 month airtime bill - which is madness really, what they're saying is that if you leave after 12 months, you have to pay for 12 months of airtime you won't be using.
With O2 (bought direct), Sky, Gifgaff... if you leave after 12 months you pay off the rest of your handset credit agreement, and walk away - without making any more airtime payments. No lock-in.
Most of the devices were never locked, CPW just put your choice of SIM in and the SIM tied you to a network contract... the trick was to buy on PAYG, with the right device the phone was subsidised more than the compulsory credit topup added. Just dump the expensive SIM straight away.
@chris 125
But your specifically talking about contracts there - But the handset you usually receive is the "base" (with any of the bloatware or crapware) from the Network operator, additionally it is unlocked, so your free to put a SIM in it from another network.
"Buy from CPW and you're tied into a 24 month contract - having to buy yourself out of airtime and handset if you want to leave early."
Not my experience. I bought my phone sim free unlocked from CPW, it was a reasonable deal and I had the phone there and then.
Presumably the O2 phone will still have network customised software though? Giffgaff I think sell base versions, not sure about Sky. I've no particular objection to a fixed contract if I can get a good deal, but the slowness of EE bringing out updates for their customised version of my phone after Samsung have done the base version means my next phone will be bought direct.
I tried to buy a phone from them one day. When I realised it is conditional to me giving up all my personal data ... I noped out of it.
Sadly the only business cases where you can exchange money for a service without strings attached these days seem to be online.
@ Karlis 1 "I tried to buy a phone from them one day. When I realised it is conditional to me giving up all my personal data ... I noped out of it."
Depends what they requested. If you were a new customer they would normally do a credit check and they would typically ask for proof of address (e.g. utility bill) and proof of identity (e.g. driving licence). That seems reasonable. Exactly how extensive was their request?
@pleb "Buy from CPW and you're tied into a 24 month contract - having to buy yourself out of airtime and handset if you want to leave early." Not my experience. I bought my phone sim free unlocked from CPW, it was a reasonable deal and I had the phone there and then.
This charging for the remainder of a fixed term contract was dealt with by OFCOM a year or two ago. Companies can charge for the remainder of a contract (I'm thinking of service provision rather than payment for equipment like a handset) but only the actual cost to them which is normally much less than the headline monthly price. Sorry - I don't have a link to hand with more details but if DixCar are charging the full monthly airtime rate for contracts cancelled mid-term they ought to be taken to task on it.
Let's go with brexit.
Nothing to do with the ECB allegedly relaxing QE later in the year.
Nothing to do with our low interest rates.
Nothing to do with European stability after the French election.
So in effect the Euro is a better proposition for investors than the pound at the moment.
Brexit I will concede does cause instability but it's not the only reason for the weak pound.
That's before we even look at carphone warehouses business model.
I also can't remember any one in the remain (project fear as you put it) camp telling me phones would go up in price.
@rtfazeberdee
Yeah and considering we haven't actually left yet why do you think the pound is crashing in value?
Come on, you're an intelligent person, you tell me why something that hasn't happened yet and isn't going to happen till 2019 is causing the pound to fall in value? Add to that why are all the politicians making it as much about bafoons as they can?
I'm sorry but the pound crashing in value is preparing you for the second vote, nothing else. Everyone will vote right this time. (right depends on your own viewpoint)
"Come on, you're an intelligent person, you tell me why something that hasn't happened yet and isn't going to happen till 2019 is causing the pound to fall in value? "
The referendum _has_ happened. Over a year ago. It's the decision to leave that caused the pound to drop, not the leaving.
@gnasher729
So what you're saying is that the currency markets are determined by politics and the media and there's really no sense or logic to it. Surely that can't be right. Then again it could be set up for someone to make a nice big fat profit out of the currency fluctuations.
I would l also be interested in the opinion of someone who understands economics more than me to explain why the pound fell in value the instant the result of the vote was known.
When history looks back on all this I do hope someone puts a note in about how the currency markets were manipulated to punish the common man for the choice of a country. Regardless of which way you voted or will vote that's just not cricket.
@ Andrew Moore
"...Project Fear becomes Project Fact."
Really? No. The EU rules borking up profits, thats the EU doing it and so would occur if we remained. As for the price of handsets going up, we have a party who are negotiating leave but are only half heartedly into it. Of course there is uncertainty.
But project fear so far has remained project fear. Or for us watching it is getting funnier to watch as it continues to grasp at straws.
"From June, EU legislation meant people were able to call, text and use mobile data at no extra cost regardless of the EU country they visited. This change is also expected to hit DixCar's profits."
Those evil EU beaurocrats, eh? Making our phone calls cheaper abroad! Disgraceful!
I presume that all phone companies' profits will suddenly rise again once we have actually left and they can charge British people whatever the hell they want again for roaming whilst abroad.
Not sure what's so funny about that myself.
@ Adam 52
"No, that's gay marriage. Don't you remember the UKIP campaign?"
Actually no. I dont recall any campaign by UKIP about that. The only recollection I have of anything like that from UKIP was from some councillor who expressed his views but not the views of the party.
But please do provide a link to the UKIP campaign
@ MyffyW
"The sound of euro-sceptic chickens coming home to roost."
Please tell me that label is coming back again. It was amusing seeing the label vanish quickly when we were proved right over the euro currency and I now take it as a badge of pride. Sounds better than brexiter.
"please tell me that label is coming back again."
For those that have followed the Euro since it's launch ? Will understand it is a far more stable currency that pound sterling. Despite the horrendous attacks by the global monetarists. To think otherwise is a 19th century mindset.
@AC
"Will understand it is a far more stable currency that pound sterling"
Erm what? Sorry if you ment that as a joke, normally it would be posted by a named commenter with the joke icon or even the troll icon. If not then you may not be aware of the euro.
"To think otherwise is a 19th century mindset."
Oh. So no fact just 'I am right or you are using outdated thinking'. The euro should have gone under already. To avoid that the EU sacrificed countries and the eurozone is years behind the US and UK in recovering from the recession. We are currently having currency reactions to uncertainty, but to mistake that for the euro being a better currency is shocking. We are still waiting for them to decide what they are going to do with their currency to fix the underlying problem. Can they somehow convince politicians to sacrifice their elections for fiscal transfer or do they split the euro up into levels (currencies)?
EU legislation meant people were able to call, text and use mobile data at no extra cost regardless of the EU country they visited. This change is also expected to hit DixCar's profits.
They've sold the phone, they've got commission from the network, why would it hit their profits when people go on holiday for a week or two?
"They've sold the phone, they've got commission from the network, why would it hit their profits when people go on holiday for a week or two?"
Presumably it's that commission that is the issue. Networks anticipate losing income, therefore retailers get offered lower commissions on sales. Given how easy it is to buy a phone through a network, or just from Amazon or often directly from the manufacturer, retailers like Dicphone have a seriously weak negotiating position; about all they can do is accept whatever a network says and pray they don't change it any further.
I would expect this will be twofold:
1. ID mobile is a network run by Carphone (which uses 3). They will have higher costs as a result of the legislation >> hits profits.
2. Network providers have to pay extra and can't directly charge this to the customers >> they charge the sellers more
I'm currently doing a refresh cycle in work, upgrading iPhone 6 devices to 7 and Galaxy S5 to Galaxy S7 for my clients. I just can't see if it was my money any killer feature to justify me getting into a £40 a month contract again for 2 years if I had a iPhone 6 or S5 that was due an upgrade. Currently I'm using a B&Q Aquaris Ubuntu Edition E4.5 on a rolling £5 a month sim and it does everything I need.
Now it doesn't do Snapchat or Instagram, but to be honest now I'm not using I'm realising I'm not actually missing that much.
I'm currently doing a refresh cycle in work, upgrading iPhone 6 devices to 7
Wouldn't it make more sense to wait 6-12 months, once the iPhone8 is out, and you might get a better deal on the 7s? Or don't Apple prices ever go down?
Genuinely curious. Have no idea of the details of Apple pricing.
Just wait until we get close to Crimble and the pawn shops/cash converters will have plenty of iPhone 7/7+ and 6s/6s+ for sale at very good prices.
It is just not worth upgrading to new anymore like buying new cars. Let some other sucker carry the off the lot/out of the store depreciation.
Apple prices do drop but not by much, probably £50 a handset. What you are saying makes sense but we just have a 2 year handset refresh policy (mostly because of support/warrenty) shich just happens to fall late spring, just mopping up the last now. If it was October every two years would probably be better as Apple refresh usually in September.
"Genuinely curious. Have no idea of the details of Apple pricing."
For computers: New model comes out, old model disappears from the shop. Three months later the old models start appearing as "refurbished" at a lower price. But also, when new models arrive, the price is newly calculated according to the exchange rate (prices for existing models rarely ever change, even with quite strong currency fluctuations), and the last time this was quite bad for the UK, when old models were priced according to pre-referendum exchange rates, and new models were priced according to post-referendum exchange rates.
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