The owner of Dixons and Carphone Warehouse has warned of a plummet in profits this year, thanks to the falling value of the pound and less substantial hardware innovations.
Noting “challenging conditions” in the UK phone market, Dixons Carphone’s group chief executive, Seb James, wrote in an unscheduled statement that technical innovations have become more incremental. “As a consequence, we have seen an increased number of people hold on to their phones for longer.”
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“And while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend,” he added. “We now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year.”
The statement goes on to say that expected pre-tax profits for the year are now set for between £360 million to £440 million – down £501 million from last year, and substantially less than the £495 million that analysts had been forecasting. As a result, shares this morning fell 20%.
Changes to EU roaming charges were also held up as a culprit. Previously customers would need to pay extra when using data abroad within the EU, but from this year those charges have been scrapped. Dixons Carphone said it could take a hit of up to £40 million as a result.
The rising costs of handsets in the face of a falling pound may mean people are holding onto their phones for a few months longer than previously, and this is compacted by a lack of marked advancements in terms of technology. September will see Apple unveil its tenth-anniversary iPhone, so far dubbed the iPhone 8, and while this is expected to be a more substantial upgrade than previous iterations, James told The Guardian that his company is “not betting the farm on it”.
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