Dixons Carphone PLC (LON:DC.) warned that sales and profit will be hit as it has closed all its stores across the UK as part of the government lockdown to limit the spread of coronavirus, even though it was planning to permanently close all 531 of its Carphone Warehouse outlets.
Online trading in the first three weeks of March surged 72% in the UK and Ireland and 36% in the Nordics as people bought computing and other electrical goods as they prepared to work from home because of coronavirus, the FTSE 250 group said.
The group’s total like-for-like sales in March were up 13% as electrical grew 23% and this was only partly offset by a 24% shrinking of mobile sales.
For the preceding eight weeks to 29 February, LFL sales were flat, as 3% growth in electrical was dragged down by an 11% decline in mobile.
This means for the 11 weeks to 21 March, group sales were up 4%.
Dixons, which said staff who normally work in stores will still be paid thanks to the government’s help, said full-year profits would be lower as the closed stores were expected to contribute sales of around £400mln for the rest of the year, which it only expects to see partly recovered through online.
But costs will be at least £200mln lower from government interventions in terms of business rates suspension and support for salaries, while discretionary spending control will cut another £200mln or so, with lower inventory buying and further leeway in 2020 coming from deferrals of tax payments of around £190mln.
With access to a total of over £700m of undrawn borrowing facilities and “significant headroom” to its debt charge cover, management believe there is “sufficient funding capacity” available to meet current obligations.
Having already paid an interim dividend in December, a decision on the final dividend payable this coming September will be made when there is a clearer view on the scale and duration of the impact of coronavirus on the business.
DC shares were up 2% to 82.26p by mid-morning on Thursday, but still down 42% in the year to date.
Analysts at Liberum said the cash control measures will delay the transformation programme, with net debt no longer expected to be cut this year, but they expected the shares to react positively.
Sophie Lund-Yates at Hargreaves Lansdown said: "One thing to keep in mind is that if the pandemic results in a longer-term economic slump, Dixons’ sales could be challenged for a while. In uncertainty people are a lot less eager to upgrade their TV or washing machine."
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