Retail stock to watch: Dixons Carphone PLC (LON: DC)

Dixons Carphone PLC (LON: DC) was able to enhance its topline, even though the UK consumer confidence has been week due to events like Brexit, potential rate hike and falling pound. In the fourth quarter ending April, DC’s like-for-like group sales had increased by 2%, better than the company compiled consensus forecast of 0.9%. The company’s  like-for-like sales in the UK and Ireland rose 2%, driven by a strong electricals performance. Meanwhile, likes-for-sales in the Nordic region, where it owns Elkjop and Elgiganten, were also 2% higher, and in southern Europe, where it owns Greek chain Kotsovolos, like-for-like sales increased by 5%.

Moreover, Dixons Carphone has been successful in an area where Amazon’s presence is long established. The company is selling an array of products from mobile phones to dishwashers, and has boosted its market share by first matching Amazon on price across almost all categories, then redesigning stores to lure shoppers and sell them supplementary services. DC is trying to keep up with Amazon has been an everyday business since the company was formed in a 2014 merger, a deal that was partly a response to the growing threat of the online giant. As rivals such as the Comet chain have perished, Dixons Carphone has built an unblemished record of domestic sales growth. Further, Dixons Carphone has a dedicated team that looks on more than 100,000 competitor prices and with Amazon making changes frequently, members run checks several times a day. The store employees are equipped with tablets to show how prices stack up against rivals to help convince shoppers that buying online isn’t cheaper. The customers are shown that products that can’t be bought elsewhere for less. In addition, DC’s refitted stores seek to offer a more engaging shopping experience, with Nespresso bars sitting alongside headphone testing areas.

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Additionally, Dixons Carphone has introduced supplementary services such as mobile phone screen repairs and paid-for tutorials that train the customers how to use their new laptops or digital cameras. These add-ons had accounted for more than half its 4.1 percent operating margin last year.

However, the retailer’s progress has not been recognized by investors of late as its shares have lost almost a third of their value since the U.K. voted last year to leave the European Union. The discretionary nature of the company’s products potentially leaves it vulnerable to a spending slowdown as disposable incomes are squeezed. GfK’s index of U.K. consumer confidence fell to its lowest in a year in June.

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