Dixons Carphone PLC's shares slumped more than 20% on May 29 after the U.K. electrical and telecommunications retailer forecast a decline in profit for fiscal year 2018-19 due to a difficult trading environment.
The company in a trading update said it expected to deliver headline profit before tax of about £300 million in the year ending April 2019. For the year ended April 2018, it expects to report headline profit before tax of about £382 million.
Its share in London closed May 29 down 47.8 pence, or 20.5%, at 185 pence.
Dixons Carphone cited a contraction in the U.K. electricals market and a decline in the postpay market for mobile phones. It predicted that gross margin would decline but be partially offset by cost initiatives. The company, which operates more than 2,000 retail outlets, said it had closed 92 of its stand-alone Carphone Warehouse stores during the previous fiscal year. Its U.K. stores also include the Currys PC World banner.
London-based Dixons Carphone said it planned to address recent underinvestment. During the fiscal year to April 2019, it expects to raise compensation for its staff and to boost spending to improve its customer experience.
For the 16-week period to April 28, Dixons Carphone reported that group revenue rose 3% year over year on a like-for-like basis. Growth was fueled by rises of 10% year over year in Greece and 8% in the Nordics, while growth in the U.K. and Ireland was 1% against a subdued market backdrop.
The company is due to report preliminary results for the fiscal year ended April on June 21.
CEO Alex Baldock, who took up his post only on April 3, in a statement said the company's problems were "fixable" and that early action would be focused on the U.K.
"In electricals, we're focused on gross margin recovery. In mobile, we're stabilizing our performance through improvements to our proposition and network agreements. In both, we'll work hard to improve our cost efficiency," Baldock was quoted as saying. "We won't tolerate our current performance in mobile, or as a group. We know we can do a lot better."
Dixons Carphone expects to maintain its full-year dividend at 11.25 pence per share.
