Dixons Carphone profits hit by smartphone slump

Dixons Carphone (Frankfurt: CWB.F - news) is planning to scale back its mobile phone operations after a half-year profits collapse.

Pre (Shanghai: 600048.SS - news) -tax profits tumbled by 60% to £61m for the 26 weeks to 28 October, down from £154m for the same period a year ago.

Chief (Taiwan OTC: 3345.TWO - news) executive Seb James said: "We have a high cost base and we need to address that, and we always look at our store estate."

The firm had warned of a tough mobile phone market earlier this year.

But markets were cheered by more recent signs of good trading following a record Black Friday, sending shares nearly more than 8% higher on Wednesday.

Analysts said there was room for the group to cut back its store estate, although the company insisted there are currently "no store restructuring plans".

Like-for-like sales of electrical goods in its UK and Ireland (Other OTC: IRLD - news) divisions were up by 6%. However, falling demand for new smartphones saw mobile sales take a 3% hit.

The high street chain announced an overhaul of its "challenging" mobile division to deliver a "simpler, less capital-intensive business".

Mr James added: "As we said in August, the UK post-pay mobile phone market is tougher, with a combination of higher handset costs and relatively incremental technology growth continuing to cause customers to hold on to their handsets for longer and some to choose a SIM-only contract in the meantime.

"In addition, the later launch of the iPhone X pushed some sales into the second half of our financial year."

Neil Wilson, senior market analyst at ETX Capital, said: "With (Other OTC: WWTH - news) over 700 Carphone stores in a total estate in excess of 1,000 across the group, there is ample opportunity to rationalise the Carphone estate and improve profitability in mobile while still retaining a dominant market position."

Mr James also said the firm is considering taking bitcoin payments for its products, but added that it is currently too early to do so.

The firm expects full-year profits to come in at between £360m to £400m.