Dixons Carphone warns of profits slump due to 'increasingly expensive' smartphones

UK RETAILER Dixons Carphone issued a profits warning, blaming the expected dip on Brits' increasing resistance to pay premium prices for 'flagship' smartphones.

Furthermore, with the pace of change in the smartphone market slowing, people are holding on to their existing phones for longer instead of upgrading as regularly as they used to, according to the firm.

"Over the last few months we have seen a more challenging UK post-pay mobile phone market," group CEO Seb James claimed in the trading statement.

"Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been more incremental.

"As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year."

In the longer term, he added, the market is expected to "return to normal", but it could also herald a market shift with consumers increasingly regarding smartphones as commodity items and expecting to pay a commodity, rather than premium, price.

The statement was made as Britain's biggest bricks-and-mortar electrical retailer warned of pre-tax profits down by about one-third to one-quarter on analysts' expectations, in a range of £360m-£440m compared to expectations of £508m.

Its Connected World mobile services business, meanwhile, has seen revenues crash by 25 per cent, although it represents a much smaller slice of the business. Founded only in 2013, it would already appear to be struggling.

Nevertheless, despite blaming the company's unexpected slow down on smartphones, the company remains hopeful that Apple's iPhone 8, coming next month, will help goose sales in the final quarter of the year. µ

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