Dixons Carphone Warehouse is to close all of its UK stores focused on phones with the loss of nearly 3,000 jobs, as consumers shift their shopping online and upgrade mobiles less often.
The company said on Tuesday that its 531 standalone Carphone Warehouse stores will close from April 3rd, with about 60 per cent of staff facing redundancy and the remainder expected to be offered new roles.
The group’s mobile phone services will be sold from Carphone Warehouse shops that are located within large and mainly out-of-town Currys PCWorld stores as well as online.
Investors welcomed the move, sending shares 12 per cent higher in midday trading, while the broader FTSE 250 was down 4 per cent.
Alex Baldock, chief executive, said that the 300 or so large stores “are doing well, with footfall steady, and that is why we are placing a big bet on these stores and investing millions of pounds in them”.
By contrast, footfall in the smaller Carphone stores was down 16 per cent this year and many were losing money. He added that customers “increasingly want to see technology in all one place”.
Although Mr Baldock had already shut about 90 stores since taking over in 2018 - and refused to rule out more closures - the announcement comes just as the UK government is encouraging people to stay at home in an effort to contain the spread of coronavirus.
He acknowledged that it was “a desperately difficult decision to take at any time”, but said that the looming disruption from coronavirus had prompted it to double down on larger stores rather than “taking a piecemeal approach” to closures.
Tony Shiret, an analyst at Whitman Howard, said the fate of the remaining Carphone Warehouse stores “was the elephant in the room” in the company’s restructuring plan. “The issue has always been when it would happen, as Dixons moves to a new business model.”
Shutting the stores is part of a restructuring designed to return the phone services business, which is expected to lose about £90m this year, to profit. Carphone Warehouse has been hit as consumers shift to buying handsets and call plans separately, and as they upgrade phones less frequently.
Mr Shiret added that while many of the stores were unprofitable, the handset sales they generated were needed to meet volume targets contained in Dixons’ contracts with mobile phone networks.
But Mr Baldock said that as the company renegotiated network contracts, the need to hit these targets had become less pressing: “The balance has shifted and the constraints imposed by the legacy contracts are easing.”
Investors welcomed the announcement amid the broader gloom, sending shares 12 per cent higher in midday trading, while the FTSE 250 was down 4 per cent.
Despite their number, the stores that will close represent only about 8 per cent of the company’s selling space. They typically occupy about 800 sq ft and are located in high streets and shopping centres.
Dixons said there would be a total positive impact of about £200 million (€220 million) on cash flow from the restructuring. Pre-tax profit for the fiscal year 2019/2020 is expected to stay at £210 million, the group’s previous estimate, and net debt is forecast to be lower than last year.
In a statement on Tuesday, the FTSE 250 group said it had not yet seen a “material impact from Covid-19”.
Mr Baldock said the company “was preparing for severe disruption in its store operations” but believed that online sales “could take up part of the slack”. He declined to disclose the portion of sales made online but said that it was rising and taking market share from others.
Shares in Dixons Carphone were up 4.5 per cent in morning trading, though they have still halved since the start of 2020.
The news follows a decision on Monday by Halfords to close its 22 Cycle Republic stores, which serve mostly city commuters, with the potential loss of about 200 jobs. – Copyright The Financial Times Limited 2020
