By Michael Northcott Thursday, 17 January 2013

Cheers Comet! Dixons Retail enjoys bumper Christmas

It's an ill wind as they say, and it seems Comet handed Dixons a festive windfall by folding when it did.

Dixons Retail, the group that owns Currys, PC World and of course Dixons, has reported a healthy rise in sales and profits for the key Christmas period of 2012. Ignoring the effect of new stores and closures, sales in the 12 weeks to 5th January were up 7% compared with the same period the previous year.

It is worth noting that Comet was still open for good chunk of that 12 week period and had slashed its prices to clear stock as quickly as possible, so Dixons Retail stores were competing for bargain-hunting customers lured by Comet’s low prices. But just days before Christmas, Comet’s shutters were all down and last minute shoppers were lost.

Still, despite the strong performance, shareholders don’t seem thrilled by the results. Markets are worried about slimmer profit margins, which Dixons admits were squeezed during the period. Shares fell 3.4% in Thursday morning trading, and this compounds the 3.2% fall over the last two days because of anticipated poor sales. 

Dixons said that margins had slimmed down because consumers were changing the mix of products that they were buying, tilted more heavily in favour of low-margin tablet PCs. It said full-year profits would be around £80m. It seems tablets are the order of the day: catalogue retailer Argos revealed ahead of its official results announcement that profits will be ahead of expectations for the full year, and Dixons was reportedly shifting a tablet PC every five seconds in the final rush before Christmas Day. 

Despite the high profile appointment of former Lovefilm boss Simon Calver to the top job, Mothercare’s seemingly inexorable demise continues. It has reported a further drop in sales in its UK stores, with whole group revenues in the 13 weeks to 12th January falling 7.4% compared with the same period a year ago. Specifically in the UK, the drop was a much larger 12.9% - but this was mainly because of the closure of 11 more stores. Flogging babygrows to expectant mothers is a very different business from renting out the latest horror film, eh Simon?

The UK business has declined faster in the last three months than in the whole of the six-month period before that. But at least Mothercare is doing better internationally, with a 14.8% rise in overseas sales.

Finally, Primark. That’s a chain that is enjoying a healthy performance, and it reported on Thursday that sales jumped by a quarter in the last three months, providing a big boost to profits at parent company Associated British Foods. Overall revenues rose 10% for ABF in the period, despite issues with the groceries business and poor sugar beet yields affecting the sugar business. But clothing manufacture enjoyed a boost because of a drop in the global commodity price of cotton, pushing up operating margins compared with 2011.

It seems Primark, with its rails and rails of clothing for under a tenner, was a magnet for frenzied Christmas shoppers with tight purse strings…

So, a mixed back for the UK high street. With HMV, Blockbuster and Jessops all in administration, it’s good to hear that at least some players are having a better time of it…

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