Dixons Carphone shares nosedive on profit warning

Company's stock also went 'ex-dividend' today, which decreases value for stock buyers

Dixons and Carphone Warehouse merger
(Image credit: SHAUN CURRY/AFP/Getty Images)

Dixons Carphone issued an unscheduled and gloomy update to the stock market this morning, sending its shares into a tailspin that saw them shed 30 per cent at one point.

At the time of writing, the shares were trading around 20 per cent lower at £1.80.

In its trading update the owner of Carphone Warehouse and consumer electronics and household appliances retailer Dixons downgraded its full-year profit forecast to a range between £360m and £440m, from £501m last year.

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Some of that is because of an unfavourable comparison with a year that included a £71m boost from "one-off" factors. But the company also warned of tough trading in its Carphone Warehouse business.

"Dixons Carphone said customers were not upgrading their phones as frequently because handsets had risen in price," says the BBC.

"It also predicted it would take a hit from the EU scrapping roaming charges for people using mobile phones abroad."

New mobile phone handsets have in the past driven customers to take out new contracts, from which Carphone Warehouse takes a cut, but they are now less moved by "incremental" advances in smartphone technology.

The company said it is hoping the tenth anniversary iPhone 8, expected to be out next month, will boost sales but that it is "prudent to plan on the basis that the overall market demand will not correct itself this year", says the Financial Times.

Dixons Carphone shares were also hit today by the stock going "ex-dividend", which means the forthcoming investor income payment in September now belongs to the seller of the shares and not a buyer.

It is typical for shares to drop on the day a stock goes ex-dividend by the value of the upcoming payout, but that would account for only around one seventh of the declines seen in early trading.

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