UPDATE 2-TV viewers give Olympic boost to Dixons
By Kate Holton
LONDON, Sept 6 (Reuters) - A rush to buy televisions and tablet computers ahead of Britain's summer of sporting and royal events helped Dixons maintain its growing sales trend, Europe's second largest electricals retailer reported on Thursday.
The boost in demand for televisions to watch the Euro 2012 soccer tournament and the Olympics and continued solid trading in northern Europe in the 12 weeks to July 21 enabled the group to offset a weak performance from its stores in southern Europe.
"I've been gently encouraged by our peformance which turned out, certainly in the UK, Ireland and northern Europe, to be slightly better than we anticipated," Chief Executive Sebastian James said.
The trading update followed a move by the operator of the PC World and Currys outlets in Britain to cut costs and develop its online offering, allowing it to gain share by lowering prices and improving its product range, even in markets like Greece where consumer confidence is virtually non existent.
However, like other British retailers, James cautioned that August had proved to be quieter, ironically as consumers stayed at home to watch the London Olympics on their new televisions. Overall it remains cautious about the outlook and expects a quieter period before Microsoft's launch of its new Windows 8 operating system in October and the start of the Christmas trading period.
"A good first-quarter sales performance from Dixons, broadly following the trends seen in the fourth quarter," Panmure analyst Philip Dorgan said.
"We think that profits should have decent momentum over the next few years, as margins ease up in the UK and losses are eliminated in Southern Europe and PIXmania. Dixons operates in a tough space, but we expect it to continue to be the strongest multichannel operator. We therefore remain Buyers."
Shares in the group were up 2 percent at 19.44 pence on Thursday, extending gains of nearly 20 percent in the last month.
European retailers have been hit by the loss of confidence and disposable income from consumers grappling with rising prices, muted wage growth, austerity, and the sovereign debt crisis. Dixons and rivals MediaMarkt Saturn and Darty are finding life particularly tough with competition from supermarkets and the internet for discretionary goods.
Dixons has however benefited from disarray at the rival Comet chain in its home market. Darty, formerly known as Kesa, sold the loss-making British business Comet to private investment firm OpCapita for a nominal 2 pounds in February.
"The series of celebratory and sporting events - the Olympics, European championships and of course the weather which was in our favour, ie very drizzly and British, was helpful and contributed to deliver a pretty good start to the year," James said.
The group, which trades as Elkjop in Nordic countries, Unieuro in Italy and Kotsovolos in Greece, said sales at stores open at least a year were up 5 percent in the 12 weeks to July 21, maintaining the rate of growth seen in the final quarter of the 2011-12 year.
Dixons, which makes just under half of its sales in Britain, said like-for-like sales in the UK & Ireland division were up 7 percent, having been up 8 percent in the previous quarter.
A move into London's land-mark Harrods store had proved a huge success, with the outlet "trading its socks off".
Group sales from its multi-channel arm, which has an internet offering in addition to the stores, were also up strongly, rising 39 percent, as customers bought products online and collected them from their nearest store.
Growth in Northern Europe was up 13 percent on a like-for-like basis with Denmark and Finland trading particularly strongly, while southern Europe was down 10 percent, dragged down by the weak consumer confidence in Greece and Italy.
"The trends are definitely not improving in southern Europe and we are not very optimistic about what is likely to happen there," James said, adding however that the Greek market had shown some signs of stabilising in the last three months.
Dixons in June pledged to stay in Greece, saying it believed the market would come good eventually and in the meantime it was taking share off rivals.
"It's very encouraging that customers in these tough times are at least choosing us to the extent that they're choosing anyone," he said.
The only other weak spot for the group came from its online business PIXmania, which it took full ownership of in August. James said it was too soon to know what it would do with the business but suggested it could get rid of some elements if they were found to be unnecessary.
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