More bad news for the high street as profit warning prompts decision to close 92 Carphone Warehouse stores
Pressure on the British high street continues with the news that Carphone Warehouse (CW) is to close 92 standalone stores this year.
The decision was taken by CW’s owner, Dixons Carphone, after it warned of a sharp fall in profits this year, news which saw shares in the company plunging down 20 percent.
Carphone Warehouse has approximately 700 stores across the UK, but struggling to contend with a shifting mobile phone landscape and rising costs, due in part to a rise in the minimum wage.
Dixons Carphone said in an earnings outlook statement that it expects pre-tax profits for 2017-18 to be £382m; 24 percent down on the £501m a year before.
But it depressed the market when it predicted that profits will fall to £300m in 2018-19.
“Our UK mobile business maintained its leadership position delivering flat like-for-like sales growth across the year in a declining postpay market,” said Alex Baldock, group chief executive.
“As seen throughout the year, postpay market conditions and our contractual commitments with the networks have meant that gross margins continued to be challenged.
“Overall, gross margins are expected to be down, partially offset by cost initiatives,” said Baldock. “We have taken early action here with the planned closure of 92 Carphone Warehouse standalone stores this year. At this stage we are not expecting any material revaluation in our mobile debtor however, as seen in prior periods there can be some variability, both up and down, given market conditions.”
There is little doubt that Carphone Warehouse is being hurt by consumers deciding to hold onto their mobile phones for longer. Another hurtful trend is consumers opting for “SIM-only” contracts.
Despite the store closures, the good news is that there will apparently be no job losses because of store closures, as staff will be offered the chance to move to larger outlets nearby.
But there is no disguising the fact that closure of 92 standalone stores will add to the beleaguered state of the British high street.
Carpetright, Marks and Spencer, New Look, Mothercare, Toys R U and others are all closing stores in the face of falling consumer confidence and a shift to buying online.
In January this year Carphone Warehouse was fined £400,000 for a 2015 cyberattack that saw the personal details of more than three million customers and 1,000 employees exposed to criminals.
The penalty was one of the largest ever dished out by the Information Commissioner’s Office (ICO) and reflected the inadequacies found in the company’s cybersecurity measures following an investigation.
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