There has been a great deal of interest in the newly-merged Carphone Dixons and its performance since the two companies joined forces in a deal worth almost £4 billion in August. Dixons Carphone today announced it had made a “good” start. Whilst Dixons reported only a 1 per cent decline in revenues year-on-year, its partner Carphone Warehouse saw revenues fall by 17 per cent.
The news for Dixons Retail was encouraging, as the company saw like-for-likes sales increase by 4 per cent in the UK, boosted by the World Cup this summer. Carphone’s sales fell by 6 per cent, however, due to difficult trading conditions in its Spanish and Portugese markets in Southern Europe. These figures are unlikely to convince investors one way or the other, reflected in early trading as shares in the company remained flat at 367.5p.
Although the merger was viewed with some scepticism by investors initially (wary of another disaster like Carphone’s merger with American firm Best Buy), there is some logic behind the deal, and the new group is due to join the FTSE 100 when it comes up for review on 22 September.
Dixons Carphone is now well positioned to gain ground in the UK electricals market in the run up to Christmas, and is continuing to formulate an effective response to online competitors. Important strategy decisions include the leveraging of its bricks-and-mortar stores as a key point of difference, as well as investing in customer service improving price perceptions.
The group has been opening Carphone shops inside Dixons Currys and PC World stores, as Dixons attempts to break into the mobile market. Persuading mobile operators that they need middlemen such as Dixons Carphone (after Vodafone’s termination of its Phones 4U contract) will be essential to its success.
The group’s CEO Sebastian James, said: “I am pleased to report a good start to the year and to our new shared enterprise. Dixons Carphone looks to be in excellent shape”. Regarding the early signs of the newly-merged firm, James said: “The integration is going well with seven departments now serving both parts of the business in an integrated way and, although it is early days, our 11 stores-in-store are performing ahead of the business case that we set out in our merger announcement”.
The imminent release of the iPhone 6 will also provide a welcome boost to Dixons Carphone, when it receives its first shipment of phones “in a week or two”. James believes that the device will have “enormous” implications for the Carphone Warehouse in particular.
Dixons Carphone has 2,900 stores across 14 countries with 40,000 employees, and hopes to have 30 more stores open by Christmas. It is expected to generate £12bn in annual turnover.