Dixons Carphone is to close its 531 standalone Carphone Warehouse stores in the UK and focus on selling mobile devices and connectivity through its shop-in-shops in 305 Currys PCWorld stores and online.
The UK retail giant said this is an essential next step in the turnaround strategy, outlined in December 2018, for its challenged mobile business, which is set to make a £90m loss in the 2020 financial year.
Dixons Carphone said it was taking the next step in its transformation by joining up its UK mobile operations with the wider business as customers change how they buy mobile devices, connectivity and technology overall, replacing their handsets less often and buying them separately or as part of more flexible bundles.
The Carphone Warehouse stores, which represent 8% of Dixons Carphone’s total UK selling space, will close on 3 April 2020. The business expects 2,900 redundancies as its businesses are brought together, but believes 1,800 of the affected employees will be able to take new roles internally.
Dixons Carphone is also renegotiating its legacy volume commitments with the mobile network operators it deals with and which will continue to roll off during the 2021 financial year.
However, the company said it remained committed to the mobile category and that current Carphone Warehouse customers will receive the same expert service in the larger retail stores that will be open. Its mobile offer will continue to be available online – including at carphonewarehouse.com and through phone sales teams.
Dixons Carphone said it was confident the restructuring would have no impact on any of the group’s transformation or medium-term guidance to deliver more than £1bn of cumulative free cashflow up to and including the 2023/24 financial year. This includes all exceptional cash costs related to the move.
The cash cost of closing the firm’s mobile business is thought to be about £220m and the company believes the mobile business will break even by the 2021/22 financial year.
Dixons Carphone said the move would mean it will no longer be encumbered by historic sales volume targets. Going forward, it said it would provide an offer that reflects how customers are buying technology today and prepare for an even more connected 5G future that goes well beyond the mobile phone.
It also revealed that later this year it will launch a new mobile customer offer that, it claimed, would better reflect what customers want in terms of flexibility, transparency, and value.
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“Customers are changing how they buy technology, and Dixons Carphone must change with them,” said Alex Baldock, group chief executive. “We are under way 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 is never an easy time for an announcement like this, but the turbulent times ahead only underline the importance of acting now.
“But though this is by far the toughest decision we’ve had to make, it is necessary. 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.”
To date, the group’s trading has not been impacted materially by the Covid-19 coronavirus, but it accepted that the current situation was evolving quickly and its future impact is difficult to assess. The company said it would give a further update on the medium-term guidance as the impact of Covid-19 became clearer.