Dixons Carphone is to close all of its 531 standalone Carphone Warehouse shops in the UK in the next stage of its omnichannel transformation strategy. In all, 2,900 people – just over 60% of staff at those stores, and part of a 17,000 UK store workforce – will be made redundant as a result.
The shops are scheduled to close on April 3. The retailer will instead sell mobile products through 305 Carphone Warehouse outlets within large Currys PC World shops as well as online. This, it says, will give customers “the widest range of technology and services in one place”.
Dixons Carphone says that that 1,800 staff – 40% of the Carphone Warehouse stores workforce – will be able to move to new roles in the business. The move, it says, is an “essential next step towards making mobile a sustainable and profitable category” as part of its longer-term transformation of the business, which was formed through a merger of Carphone Warehouse and the Dixons group in 2014. Carphone Warehouse shops currently account for 8% of Dixons Carphone’s total UK selling space. Seventy Carphone Warehouse shops in the Republic of Ireland are not affected by the move.
The move means that Dixons Carphone will cut its UK store numbers by 61% to 338 shops, leaving 309 Currys PC World UK stores and 29 Dixons Travel Stores. Since these are smaller stores, however, they represent 8% of total UK store space.
Dixons Carphone’s mobile business is expected to make a £90m loss this year as customers buy mobile devices less often, separately from data or as part of more flexible bundles. Shoppers are buying online and through the 3-in-1 Currys, PC World and Carphone Warehouse shops that are 20 times larger than Carphone Warehouse’ standalone stores. Dixons Carphone says it has invested millions in the larger stores where shoppers can see, touch and play with both electricals and mobile devices and get advice from one of 17,000 in-store staff.
The restructuring of the mobile business is expected to improve Dixons Carphone cashflow by about £200m, with losses from the mobile business reducing slightly in 2020/21 and breaking even by 2021/22. In this financial year, which ends in late April, it expects to make pre-tax profits of about £210m.
Alex Baldock, group chief executive of Dixons Carphone, said: “Customers are changing how they buy technology, and Dixons Carphone must change with them. We’re underway with a fundamental transformation to do so. Today’s tough decision is an essential part of that, the next step in making our UK mobile business a success for customers, colleagues and other shareholders. Clearly, with unsustainable losses of £90m expected this year, Mobile is currently holding back the whole business. There’s never an easy time for an announcement like this, but the turbulent times ahead only underline the importance of acting now.”
Baldock said that he knew the news would be upsetting for staff and that those who were made redundant would receive enhanced redundancy, along with any bonuses or share awards that they have earned and would support them in finding new jobs.
“But though this is by far the toughest decision we’ve had to make, it is necessary,” he said. “We must follow our customers. They want help with all technology, all in one place, and this trend is only going to accelerate in a more connected 5G world. So customers are increasingly heading, not just to our large and growing online business, but into our big stores, where they can find all the experts and tech – mobiles, computers, TVs, smart tech, appliances, gaming and all the rest – they need. But they can’t find all this in the small mobile-only stores that are one twentieth of the size; they’re visiting these less and these stores are losing more money as a result.
“That’s why we’re committed to our more than 300 big stores around the UK, why we’re investing tens of millions of pounds in them and in the thousands of expert colleagues who work in them. But it’s also why sadly we have to close the small stores. Mobile will be part of the one, joined-up business that customers want and that’s essential for our transformation. Today’s announcement is about ensuring we’re ready for that future, and staying on track for future success.”
Dixons Carphone says it has not yet felt the full effect of Covid-19 coronavirus, although it is preparing for that. The strongest impact so far, it says, has been in its airport-based Dixons Travel shops which have been affected by a sharp drop in passenger numbers in recent weeks. The group expects profit from this division to be down by about £5m in the current year although overall adjusted pre-tax profits are on track to come in at about £210m in its current financial year.
Dixons says that the effect on its supply chain has been limited and that it has worked with suppliers to get stock from unaffected areas.
In its UK and international electricals business – which accounts for more than 80% of group revenue – online sales have been strong and store sales have held up across its markets. Sales of fridges, freezers, small domestic appliances and laptops have all risen as customers prepare for time at home. The business said it was ready to switch fulfilment from shops to online and direct channels if that proved necessary.
“As a group,” it said in today’s update, “we are monitoring the situation closely. The turbulent times ahead underline the importance of acting now and staying on track with our longer-term omnichannel transformation of the group. We are aware that our stores could experience a significant reduction in sales in the months ahead and we are modelling a range of downside scenarios and planning accordingly."
Its Greek shops are expected to shut on March 18 and be closed for at least two weeks.
The retailer says it has substantial headroom on its bank lending, which is not due to mature for at two and a half years.
Dixons Carphone currently operates through 1,500 shops and 16 websites in eight countries, including the UK, Ireland, the Nordics and Greece. Its total workforce of 42,000 people includes 28,000 in the UK and Ireland.
Image: InternetRetailing Media/Paul Skeldon