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Shares in Dixons Carphone are higher this morning as stellar Christmas trading figures and the announcement of a new CEO offset a narrowing of FY guidance. The statement, coming a day ahead of schedule after current CEO James’ notice of departure on Friday, echo the polarising Christmas period seen by UK retailers: Those with strong online presence (ex-ABF’s Primark) enjoyed a record trading period, while those with a more traditional brick and mortar focus saw a continuing slide in sales.
Dixons’ revenues and sales figures will delight shareholders that have maintained the course despite shares falling to 5-year lows in 2017, with barely a negative figure to be seen (group rev. +4% YoY, like-for-like rev +6%; mobile +8% thanks to iPhone X launch; strong growth in Greece and Nordics; continued market share gains across group).
Furthermore, the announcement replacement CEO Alex Baldock – current CEO of Very.co.uk and Littlewoods.com parent Shop Direct – just days after James’ resignation will also be seen as a positive by shareholders (was the incumbent nudged towards the door?), confident that he can deliver a similar turnaround for Dixons to steady the ship during an overhaul in consumer spending patterns away from shops and towards online.
The narrowing of FY guidance (bringing down upper-end of range) is the obvious exception to positive tones struck in the company’s statement, with continued margin pressure on its mobile segment being the primary agitator, but it is largely being ignored in favour of the many positives from this morning’s release.
Today’s positive share price reaction has helped steady a 2018 sell-off, with shares having retreated from 3.5-month highs of 204p (post-Exane BNP Paribas double downgrade highs) to 186p in the first 3-weeks of the year. However, the positive move has not been enough for the shares to return to the highs, and are already off this morning’s best levels as investors digest narrowed guidance and try to reach an investment conclusion: Does a strong Christmas and new, veteran of online retail CEO indicate a recovery in the making? Or do narrowing margins take heavier precedence for investors, wary of the ongoing change in consumer spending habits? For now, at least, the former is taking the lead.
Henry Croft, Research Analyst, 22 January 2018
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