Dixons Carphone expects profit loss to deepen data breach woes
Dixons Carphone is bracing itself for plummeting pre-tax profits this week, as it continues to investigate a devastating data breach that compromised customers' personal information.
The retailer expects a 23 per cent drop in pre-tax profits to £382m when it announces its preliminary results for 2017-18 on Thursday, citing UK mobile market constraints and tight margins in electricals.
It predicts pre-tax profits to take another hit later this year, forecasting £300m for 2018/19, after announcing the planned closure of 92 Carphone Warehouse stores at the end of May.
"Though there's plenty to fix, it's all fixable," said new group chief executive Alex Baldock in May.
"We're focusing early action on the UK," he added. "In electricals, we're focused on gross margin recovery. In mobile, we're stabilising our performance through improvements to our proposition and network agreements.
"In both, we'll work hard to improve our cost efficiency. We won't tolerate our current performance in mobile, or as a group. We know we can do a lot better."
Baldock is currently dealing with a huge breach that saw hackers access 5.9m customers' cards, of which 105,000 non-EU cards without chip-and-pin protection were compromised, and 1.2m records including people's names, addresses and email addresses, though Dixons Carphonesaid it has seen no evidence this data has been stolen or led to fraud.
The breach took place in July last year but was only discovered in a review of the retailer's systems and data that took place when Baldock joined as CEO.
Shares fell more than three per cent when Dixons Carphone revealed the breach last Wednesday, but had climbed back up to a 2.45 per cent drop by Friday's market close.
Baldock said last week: "We are extremely disappointed and sorry for any upset this may cause. The protection of our data has to be at the heart of our business, and we've fallen short here."
The GCHQ-backed National Cyber Security Centre (NCSC) confirmed last week that it is working to understand how the breach has impacted UK customers and what mitigation measures the company can take.
UK data watchdog the Information Commissioner's Office (ICO) fined Dixons Carphone subsidiary Carphone Warehouse a joint-record £400,000 for a data breach that took place in 2015 under the old Data Protection Act (DPA) 1998. At the time the ICO said the high street firm had failed to implement "basic, commonplace measures".
While the old DPA 1998 rules applied when the latest breach took place, it was discovered under the DPA 2018, which imposes higher fines of up to £17 million, or four per cent of annual turnover, for hacks exposing personal data.
The ICO told City PM that it was yet to determine which law would apply to the latest breach, but that it would take into account lessons learned from previous breaches if enforcement action proves necessary.