Market report: Dixons Carphone on the slide as City gets hang-up on smartphones

Dixons Carphone was off the City’s festive shopping list on Tuesday as fresh doubts were raised about its exposure to a toughening smartphone market.

The electricals retailer, whose shares plummeted in August following a profits warning, was the subject of a big downgrade by analysts at Stifel.

They removed their Buy rating and cut full-year profit forecasts by 27% amid concerns about a lack of visibility on UK earnings and the uncertain demand for smartphones. Dixons has already warned that consumers are holding onto their phones for longer, partly due to the increasing cost of handsets as well as the “relatively incremental technical improvements”.

Shares today fell 4.3p, or 3%, to 153p, and have now dropped by more than 50% in the year to date. Stifel pointed out that DIY retailer Kingfisher — up 1.1p at 318p — and car parts seller Halfords — up 1p at 332.40p — were lower-risk bets in the retail sector.

There was better news from Topps Tiles, whose shares jumped 7% to 65.25p after it reported a return to underlying sales growth in the first eight weeks of its new financial year.Chief executive Matt Williams said the same-store improvement was encouraging after a 2.9% drop the previous year. This led to a 15% fall in pre-tax profits to £17 million in annual results today.

Topps is branching out into the commercial market with the acquisition of Parkside Ceramics, although Williams said this shouldn’t be taken as a sign that it is running out of domestic steam. He added: “It’s been a challenging year and we’ve responded well.”

Game Digital also offered cheer from the retail sector after unveiling a £19 million deal to sell Multiplay, its server-hosting business for game developers.Chief executive Martyn Gibbs said the disposal was a significant step as it will enable the group to focus on its retail estate and e-sports and live gaming initiatives. Shares climbed 3p to 47.50p.

In the FTSE 100 index, spirits were lifted by a positive outcome for the Bank of England’s latest stress tests and by a 2% rise for heavyweight stock Royal Dutch Shell after it returned to paying an all-cash dividend.

The top flight was 27.79 points higher at 7411.69, while the FTSE 250 index gained 42.61 points to 19,923.87. Cineworld was one of the big risers in the second tier as analysts at Numis placed a Buy recommendation on the company, whose hopes for a Christmas blockbuster are likely to hinge on Star Wars and Jumanji: Welcome to the Jungle.

Cineworld shares were up 20p to 674.50p, having also risen yesterday on speculation that Vue and Odeon could merge as part of further industry consolidation.