Dixons Carphone to beat profits guidance after stunning fourth quarter in UK

After an electric performance from the UK in the fourth quarter Dixons Carphone said its full year profits are likely to be "slightly above" the top end of its previous guidance.

Sales in the UK and Ireland grew by a supreme 13% on a like-for-like basis in the 17 weeks to 2 May, even improving on the impressive 10% growth in the first half of the year and the good momentum over Christmas.

Both electricals and mobile phone sales enjoyed strong trading and gained market share, the FTSE 100 company said, helped by the division's lowest ever pricing versus the market and efforts to boost customer loyalty paying off with all-time high net promoter scores.

Group like-for-like revenue in the period rose 9% and as a result management said group pro forma headline profit before tax was now expected to be "slightly above the top end" of previously guided £375m.

Nearly a year since the August 2014 merger of Dixons Retail and Carphone Warehouse, chief executive Sebastian James said the forecast-beating performance was driven by "market share gain and by strong promotional periods - including Easter - coupled with successfully streamlining the group's international assets".

Such was the strong performance that even the troubled Southern Europe region made gains, delivering Q4 like-for-like revenue growth of 8%, against consensus forecast of a decline and a 4% decline in the third quarter. This was driven by a surprisingly strong like-for-like performance in Greece.

The market in Spain remains tough, however, but trading improved quarter on quarter thanks to the new quad-play offer from telecoms provider Movistar.

Despite market share gains in all Nordic markets, like-for-like revenue growth was slower than previous quarters, at 1% on a LFL basis after 3% in the first half, due to the impact of the weaker oil price on the Norwegian economy. Consensus expectations were for a 3% increase in the quarter.

Independent City retail analyst Nick Bubb said: "It is clear now that one of the main reasons why AO.com is finding UK trading 'challenging' is because their great rival Dixons Carphone is hoovering up market share, as Dixons Carphone have blown away expectations for today’s Q4 trading update."

He noted that the consensus was for UK LFL sales growth of 5%, with the City expecting Southern Europe to fall 6%, although Nordics LFL slightly disappointed.

Canaccord Genuity praised the "blockbuster" performance and remained positive on the shares as the merged group continued to enjoy a "buoyant honeymoon period since its union last year, despite being in the foothills of the journey to double the value of the group over time".

"Robust trading and signs of competitor retreat in the core UK and Nordics consumer electronics bode well as a firm foundation for future growth and the aspiration to double the group's equity value."