DIXONS: JOB DONE
‘Staggering’ sales put retailer in ‘recovery room’
FeW retailers post a sparkling trading update and announce job done. But Dixons chief executive Sebastian J a mes’ s remark that the electrical retailer is now in the ‘recovery room’ is code for just that.
With a staggering 13pc rise in underlying sales for the fourth quarter the chain, which trades under the Currys and PC World brands, has staged a remarkable turnaround in a tough economic climate.
Having seen off a tranche of household names from Comet to Jessops and HMV, Dixons has also sunk America’s highly regarded electronics giant Best Buy.
What is all the more astounding when it delivers its full-year results in a few weeks’ time is to chart from where the business has come. Not less than a decade ago Dixons was synonymous with everything that was wrong with the High Street.
It spawned an army of substandard commission-led salesmen that gave long suff ering customers the hard sell f or unwanted warrantees. Most had little knowledge or interest in the products on the shelves and as for display it was as though the delivery truck had reversed into the store and emptied its load.
While there are still pockets of stores that are still stuck in a time warp the bulk have gone through a transformation.
Think walls sporting every kind of television that sets out all the differences to help customers make selections. Tablets, laptops and cameras have been taken out of their boxes and placed on tabletops allowing shoppers to touch, explore and become attached to the products.
Staff have also been given training of sorts, although the result is variable depending on geography and luck. Much of the stores revamp and investment in staff was due to the now neutered threat from Best Buy – Dixons had to step up to the plate or die.
That’s no overstatement as almost all around it failed due to the impact of both cut price online rivals and full- service department store chains like John Lewis.
It is this combination – the demise of its rivals, and a programme of self-help – that contributed to the stellar quarter and what’s set to be bumper fullyear results.
europe’s second biggest electrical goods retailer said profit would be at the top end of market expectations.
James is one of the few shop keepers to see a pick-up from the wet weather as customers splashed out on new technology to while away the dismal conditions.
Booming sales of tablet computers were a key driver with James citing innovations such as multi- coloured Samsung products attracting a diverse range of shoppers.
Half of the 13pc rise in fourth quarter sales were due to tablets, with James predicting ownership will grow from one in three households to one in every household as they ape mobile phones in becoming a must-have personal possession.
However, the rise of the tablet dented profit margins – down 0.7pc over the quarter – because they make less for retailers than laptops.
Heavy promotions in what is a fiercely competitive market also ate into profit.
Televisions sold well as did cookers, up 44pc, driven by a boom in baking.
The demise of Comet contributed to 50pc of sales during the past three months despite the chain collapsing during the key pre-Christmas quarter.
The firm has also managed to wipe out its debt.
Its northern european business performed well with underlying sales up 14pc and further market share gains.
Southern europe was a different story with sales down 5pc and James announcing he would happily sell troubled French online business PIX mania. Failing that he would also consider closing it down if steps taken to turn it around fail. Underlying sales at the division were down an unsustainable 35pc.
James said: ‘It has been a busy time with the start of a profound restructuring of parts of the portfolio, major changes in the competitive landscape, significant cost savings achieved, and with the continued drive to transform our stores.
‘We want to make sure that, in spite of continued economic uncertainty, this carries on into the next year and beyond.’
Dixons (up 10pc, or 3.49p, to 40p) faces strong competition from online retailers such as Amazon which are able to offer low prices by organising their tax affairs to pay as little as possible.
James said he thinks firms need to be ‘responsible in terms of tax’ but that Dixons will continue to differentiate itself from online rivals through (presumably good) service.
The turnaround complete, he is enjoying ‘the feeling of a little wind in our sales’.
Investors will be pleased he recognises the ‘best retailers in the world need to remain permanently paranoid and remain relevant to customers’.
They will want the electronics retailer looking over his shoulder.