Dixons Retail bullish despite fall in profits
Strong sales in iPads help electrical goods retailer halt sales slump
DIXONS RETAIL, Europe's second-biggest electrical goods retailer, insisted today that its new financial year had started well after posting a 17 per cent fall in 2011-12 profit against a "tough economic backdrop".
The group, which trades as Currys and PC World in the UK, said the trends seen in the final quarter of the 2011-12 year, when like-for-like sales increased 5 per cent, had broadly continued.
Dixons said it made an underlying pretax profit of £70.8 million in the year to 28 April. That was slightly down on the £85.3m made in 2010-11. Underlying sales were flat at £8.19 billion.
European shoppers have been curbing spending as their disposable incomes are squeezed by rising prices, muted wages growth, government austerity measures and fears over the impact of the eurozone debt crisis, The Daily Telegraph reports.
Electrical goods chains such as European leader MediaMarkt Saturn and third-placed Kesa are facing extra pressure due to cut-price competition from supermarkets and internet retailers such as Amazon. On Wednesday Kesa reported a 42 per cent slump in annual profits.
Dixons benefited from the disarray of competitors Comet and Argos in its core home market, a switch to digital television in the southeast of England and the success of Apple's new iPad.
The group reduced its net debt to £104 million from £206 million a year ago, and said it was on target to repay £160 million of bonds due in November, plus associated costs of about £65 million.
Shares in Dixons, which have increased by 64 per cent over the last six months, closed Wednesday at 15.9 pence, valuing the business at £574 million. CEO Sebastian James said he was "pleased that by focusing our efforts on delighting customers, we have outperformed [offline] competitors".
That said the company is still forging ahead with cost cutting measures. In 2012, £60 million in cuts are planned with another £90 million being shaved off over the next two years.
"The new financial year has got off to a good start with the trends seen in the final quarter of last year broadly continuing. However, we continue to plan cautiously and manage costs aggressively," James told Retail Week.
While sales may be pulling out of a slump the firm cannot keep losing cash, says UK Business Property. Dixons is proposing to close around a third of its 612 UK stores. It has refurbished 269 stores and plans to refit a further 63, where it is combining Currys and PC World under one roof. ·