Dixons losing less money than it was

It wasn't exactly good news from Dixons today. But at least the electricals retailer seems to be heading in the right direction.

by James Taylor
Last Updated: 19 Aug 2013
The newly-rechristened Dixons said today that it made an underlying loss of £7.9m in the 24 weeks to October 16. That might not sound much cop, but it's a big improvement on the £17.6m loss it posted this time last year. Like-for-like sales were also up a bit, although things seem to have slowed down a bit since the summer (when the World Cup boosted sales). Chief exec John Brewett sounded chirpy enough today, though he cautioned against getting too carried away, given the fragile state of consumer confidence. And judging by the dip in its share price this morning, investors still aren't confident that Dixons can find its way back to the sunlit uplands any time soon...

Dixons - which Brewett has admirably restored to its old name rather than the annoying TLA DSG - does seem to be in a better place than this time last year. 'We have maintained our momentum in transforming the Group and are performing ahead of the market,' said Brewett, pointing to the success of its store transformation programme (including an overhaul of 250 UK branches), £50m in cost savings, and a 2% rise in sales for UK & Irish stores open longer than a year. Gross margins inched up 0.3%, while financing costs fell by almost a third. All of which is good news for investors.

The less good news was that, without the fillip of the World Cup, sales seem to have slowed down a bit lately - and although things are going reasonably well at home, its overseas businesses are doing less well. Throw in the imminent arrival of giant US retailer Best Buy (which is likely to make an already tough market even more competitive) and the generally gloomy state of consumer confidence (which, presumably, could get worse before it gets better), and it's no wonder that the City is a bit nervous about Dixons' prospects. Its share price is down nearly 30% this year.

Brewett, who's two years into a three-year turnaround plan, does seem to be doing a decent job of overhauling Dixons. But if consumer spending does slow in the coming months, as looks likely, retailers like Dixons who sell a lot of big-ticket items are likely to suffer. Then there's the broader question of whether its high street model will be viable in the long term. So he has a lot of work to do yet…

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