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Eyes on Covid recovery as Dixons Carphone bosses prepare for results

Sales held up well in the first weeks of lockdown due to a spike in online orders.

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All standalone Carphone Warehouse stores in the UK were closed in April, costing 2,900 jobs (Liam McBurney/PA

All standalone Carphone Warehouse stores in the UK were closed in April, costing 2,900 jobs (Liam McBurney/PA

All standalone Carphone Warehouse stores in the UK were closed in April, costing 2,900 jobs (Liam McBurney/PA

Investors will already have a good idea of what to expect at the top of Dixons Carphone’s balance sheet next week as the business reports its results for the 12 months to the start of May.

Despite early predictions before lockdown that the company would endure a “significant reduction” in sales, the figures showed otherwise.

The last time Dixons updated shareholders on its finances, it said sales had only dropped by 3% in the five weeks to April 25.

It means investors already more or less know what revenue to expect in next week’s results, which only take into account an extra week so eyes will be elsewhere.

“Next week our focus will be on the outlook statement,” Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said.

She worries the 166% growth the company had online in the UK and Ireland in the weeks following lockdown might have slowed down since.

Demand for laptops and other equipment staff needed to work from home surged as offices emptied out.

People also turned to hair clippers as barbers closed across the country.

“We’re concerned the initial website frenzy as people stocked up on extra freezers and homeworking equipment may have simply taken future sales,” Ms Lund-Yates said.

“We’re interested to know how trading’s looked in the first few weeks of the new financial year and when – or indeed if – Dixons thinks trading will return to normal.”

Analysts are expecting pre-tax profit to hit £151 million over the financial year, less than half last year’s £339 million.

They also forecast a 3.4% drop in revenue to just over £10 billion, according to an average compiled by the company.

The increased popularity of the website could mean margins have shrunk furtherSophie Lund-Yates

Ms Lund-Yates added: “Operating margins will be something to watch, too.

“These are already thin at around 3%, largely because of stiff price competition in the sector.

“We think online sales are likely lower margin, too, so the increased popularity of the website could mean margins have shrunk further.”

Ms Lund-Yates said low profits and cash flow could end up delaying the return of the company’s dividend, which was suspended when Covid-19 hit.

“Dixons said it will only reconsider a payment to shareholders once it’s cancelled its standby debt facilities,” she said.

“How soon this can happen rests on how successfully it’s plugged the sales gap and the rate at which it’s getting through its new loans.”

It will mark the end of a turbulent financial year for the business, which was fined £500,000 in January for a massive data breach that compromised the details of 14 million customers.

Just two months later – and just before lockdown – the company announced it would close all of its standalone Carphone Warehouse stores in the UK.

The move cost 2,900 people their jobs at 531 sites across the country.

Some 1,800 members of staff were moved to other shops but were rapidly sent home as the business put more than 16,500 employees on furlough when the pandemic and lockdown hit.

The results will be presented on Wednesday.

PA