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Dixons loss narrows as Britain leads improvement
November 29, 2012 / 11:46 AM / in 5 years

Dixons loss narrows as Britain leads improvement

LONDON (Reuters) - British electricals retailer Dixons DXNS.L reported a narrower fist-half loss, helped by its businesses in northern Europe, and said it would benefit in Britain from the demise of rival Comet.

The owner of the Currys and PC World chains in Britain where Comet went into administration this month, also said on Thursday its business in Britain and Ireland had made a half-year profit for the first time in five years.

Sebastian James, chief executive of Europe’s No. 2 electricals retailer, said trading since its first half ended in mid-October had improved across the group helped, in particular, by the launch of Microsoft’s Windows 8 (MSFT.O).

Group sales at stores open more than a year rose 3 percent, led by a strong first quarter when shoppers bought tablets and smart TVs before a summer of sporting events.

That helped Dixons post a first-half profit of 5.6 million pounds ($8.9 million) in Britain and Ireland, having made a loss of 6.0 million a year ago.

With market share gains elsewhere in northern Europe partly offsetting tough southern European markets, the group made an underlying pretax loss of 22.2 million pounds in the 24 weeks to October 13, compared with expectations for a similar loss to the 25.3 million made in the first half of its 2011/12 year.

Dixons was expected to make a profit of around 87 million pounds for the year to end-April according to Reuters data, reflecting a second half of stronger seasonal trading.

While the demise of Comet, which had 6 percent of the British market, is a chance for Dixon’s to build on its 19.8 percent share, closing down sales could disrupt the market in this year’s key Christmas trading period.

Panmure Gordon analyst Philip Dorgan said Comet’s exit could add 30 million pounds to Dixon’s operating profit next year.

Shares in Dixons, which has recruited 1,000 Comet staff on a part-time basis, were down 2.1 percent at 6:25 a.m. EDT, having risen 30 percent in the past month.

“Dixons continues to underline its survivor status. While arch-rival Comet remains in a critical condition, a combination of initiatives including cost savings, store revamps and an ever greater emphasis on its online offering are driving the group’s recovery,” Hargreaves Lansdown analyst Keith Bowman said.

Problems in austerity-hit southern Europe, a region that Dixons said in June it would remain in, continued with tough trading at Kotsovolos in Greece and UniEuro in Italy. The region’s loss narrowed to 13 million pounds from 15.6 million.

Losses rose at its online gadget arm PIXmania, which makes 75 percent of its sales in France and southern Europe.

Dixons said it had taken a 45 million pound write-down on the value of the unit and was to cut its costs partly by reducing the number of countries it operates in.

European retailers have felt the effect of pressures on the consumer wallet brought on by rising prices, muted wage growth, and austerity, and are also battling competition from the internet and supermarkets. Rival Darty DRTY.PA this month said it planned to sell its loss-making Italian arm.

Net debt was nearly cleared, falling to 9.9 million pounds from 143 million a year ago.

Editing by Dan Lalor

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