Dixons turn to feel the high street pain as profits drop

Dixons Retail has posted a fall in profits as the PC World and Currys owner joined rival Comet in counting the cost of gruelling trading conditions.

Underlying profits fell to £85.3m from £90.9m in the year to April, although Dixons said it was encouraged by flat operating profits in the UK and Ireland, where it also gained market share from rivals.

However, the group still slumped to a heavy bottom line loss of £224.1m after making large accounting write-offs on the value of businesses in Spain and Greece and European e-commerce venture PIXmania.

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Dixons, which has 1,269 stores across Europe, said its 642 outlets in the UK and Ireland saw sales fall by five per cent to £3.8bn, with demand for white goods and iPads propping up the performance.

Trading in the last quarter was much weaker and on a like-for-like basis, second-half sales fell by seven per cent, with sales of televisions particularly weak.

Dixons downgraded profit forecasts on two occasions earlier this year, while it also pulled the plug on its loss-making PC-City business in Spain.

However, it said its programme to refit stores and increase focus on customer service was helping it weather the tough market conditions.

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It has concentrated on developing its 2-in-1 Currys and PC World stores and said all high street and out of town superstores will be in the format, with a small number of standalone Currys megastores in larger catchment areas.

The group said it expects to reduce its portfolio in the UK and Ireland to 450 stores, comprising 70 high street stores, 310 superstores and 70 megastores. “The portfolio will be managed to this size as existing leases expire and stores in each catchment are refitted,” it added.

Underlying profits were in line with market forecasts and helped by a strong performance from the Nordic countries, where sales and profits both increased by eight per cent, to £2.27bn and £105.6m respectively.

Total sales fell two per cent to £8.15bn, with five per cent falls in the international and e-commerce operations in addition to the drop in the UK and Ireland.

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Dixons said the outlook in the current year remains challenging, particularly as the first half last year was boosted by the World Cup and the iPad launch.

The group, Europe’s second biggest electricals goods retailer, cut the value of its assets by £309m, saying it was forced to do so because shoppers are cutting back on non-essential spending in tough markets.

The unexpected balance sheet charges relate to the closure of Dixons’ operations in Spain, and goodwill write-offs at its Kotsovolos chain in Greece and PIXmania internet business.

Chief executive John Browett described the charge as a “technical adjustment which recognises the realities of the market we’re in”.