Belfast Telegraph

Dixons Carphone to reveal rise in profits despite consumer spending squeeze

Dixons Carphone is expected to show signs of wear from the squeeze on consumer spending, despite boosting profits, when it announces full-year results on Wednesday.

The electricals giant is set to reveal a 9% jump in annual pre-tax profits to around £487.5 million, slowing from a 17% rise to £447 million in 2016.

Analysts have warned that the firm is likely to feel the strain from customers tightening their belts in the face of rising inflation.

Graham Spooner, analyst at The Share Centre, said: " Retailers in the UK have begun to report poor trading updates and express caution about their prospects going forward.

"This may be the case with Dixons as the UK consumer feels the squeeze on real incomes from rising inflation through higher import costs and modest wage rises."

The latest slew of official data for the UK economy suggests shoppers are starting to succumb to Brexit-induced price hikes, with household spending eking out its slowest quarter-on-quarter growth since 2014 in the first quarter of this year.

Inflation also hit its highest level in nearly four years in May while r etail sales took a tumble last month, with increased prices "across all sectors" being pinpointed as the key driver behind the fall.

Dixons Carphone chief executive Seb James said in January that the retailer is primed to ride out an economic slowdown and backed UK shoppers to keep spending with credit while borrowing is cheap.

In May, he said the firm was growing despite the "lively political backdrop", reporting a 9% rise in annual sales and 2% climb in UK revenues for the period.

Group revenue is forecast to come in at £10.5 billion, up from £9.7 billion last year.

Mr Spooner added: "Consumers were in buoyant moods during much of 2016 and the early part of 2017 and the trading update in May suggested that full year profits should be in the range of £485 million to £490 million."

HSBC analyst Andrew Porteous said Dixons Carphone had made "strategic progress" over the past year.

He added: "While the near term demand outlook is challenging as indicated by the return of real wage declines, recent inflation data and retail sales data, the long term position of the business is as strong as ever."