18th Jan 12
Ebooks help Dixons see the positive side
by Natasha Redman
The bottom line: Dixons helped over Christmas by huge ereader demand
The bottom line: Dixons helped over Christmas by huge ereader demand
The electrical retailer Dixons has published better than expected trading for the Christmas period and said that it was confident it would be able to repay a £160m make-or-break bond later this year.
Dixons retail’s chief executive John Browett said that the chain’s finances had been boosted by the huge demand for ebook readers and tablet computers. He explained that this was a crucial trading period for the company to get through, and said they were satisfied with the results and had the banking facilities and cash to repay the bonds.
UK stores suffered a fall in like-for-like sales over the 12 weeks ending 7 January, but the company said that profit margins had got better as increasing numbers of customers used Knowhow, its iPod support device, for help. Underlying group sales ended up falling by five per cent, as an impressive performance by its Nordic arm was cancelled out by the problems within the eurozone, where sales were down sharply at its Kotsovolos chain in Greece and in UniEuro, in Italy.
Panmure Gordon analyst Philip Dorgan said that the performance suggested there was finally for something for Dixons to be positive about. He explained that the year’s most important trading period has finished and with other high street retailers falling like flies, these figures must be mildly encouraging. He went on to say that they are f the opinion that Dixons will be able to repay its bonds later this year, helped by the planned cost savings and lower capital expenditure.
However, internet retailers including Amazon, and the supermarkets, are still a major threat to Dixons, said Dorgan. He explained that if trading deteriorated and it was unable to make enough cash to make the bond repayment, which is due in November, it may be forced to sell its crown jewel, Elkjop, the successful Scandinavian chain.
The electronics market has been among the hit amid the consumer spending downturn, with demand for games consoles and TVs falling by up to 20 per cent. That, along with the competition from the supermarkets and online retailers, is why the US company Best Buy recently closed its fledgling UK chain. And the French group Kesa practically paid a bidder to acquire the loss-making UK chain Comet from it.
Browett has spent the past four years refurbishing Dixons’ outlets and improving the company’s reputation for customer service. He says that customers are now increasingly seeking out advice before making big purchases such as music systems. He also reported improvements at the high end of the market, with consumers going for internet-connected and 3D TVs in addition to Sonos wireless HiFi systems.
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