LONDON (Reuters) - Dixons Retail DXNS.L, Europe’s second-biggest electrical goods retailer, is to pay 69 million euros ($91 million) to Germany’s mutares (MUXG.BE) to take the loss-making PIXmania e-commerce business off its hands.
Shares in the group, which have more than doubled over the past year, rose up to 10 percent on Thursday on the PIXmania deal and news of a withdrawal from Turkey - actions in line with Dixons’ plan to focus on markets where it has a leading “multi-channel” position with a combined stores and internet business.
PIXmania, which operates in France and the Czech Republic, employing about 850, saw underlying sales slump 28 percent in the first quarter and has been dragging down the performance of the wider group as it battles difficult markets across Europe.
While the internet has been a boon for many retail sectors, online sellers of electrical goods have often struggled to provide the service levels required by customers and have faced stiff competition from stores and “multi-channel” operators, as well as U.S. e-commerce pioneer Amazon (AMZN.O).
In June Dixons, also home to the Currys and PC World chains in Britain, Elkjop in Nordic countries, UniEuro in Italy and Kotsovolos in Greece, booked restructuring and impairment charges of 168.8 million pounds ($264 million), relating mainly to PIXmania and the disposal of its Equanet business.
Dixons has received an irrevocable offer from German industrial holding company mutares to purchase PIXmania. The deal, which is subject to up to four months consultation with PIXmania’s French works councils, would see Dixons provide the cash to support mutares’s plan to develop the business.
“PIXmania operates in countries where we’re not market leader and operates a (single channel) model that is not ours. I don’t think we’re particularly good at running that kind of business,” Chief Executive Sebastian James told reporters.
“We do best when we stick to our knitting,” he added.
Dixons has also agreed to sell its loss-making 32-store ElectroWorld operations in Turkey to local specialist Bimeks (BMEKS.IS) for about 2 million pounds.
“That just leaves Italy to sort out, assuming Dixons keep Greece,” said independent retail analyst Nick Bubb, adding the amount of dowry paid for PIXmania was “very acceptable”.
John Cummins, analyst at WH Ireland, raised his earnings forecasts for 2015 and 2016 by 18.5 percent and 13.3 percent respectively.
News of the disposals came as Dixons posted a rise in first-quarter sales with growth in Britain and northern Europe, driven by robust demand for tablet computers, offsetting continued weakness in southern Europe.
Sales at stores open over a year rose 2 percent in the 12 weeks to July 31, though gross margins fell 0.4 percent, in line with analysts’ expectations.
Like-for-like sales were up 6 percent in the UK and Ireland and grew 5 percent in northern Europe. But they fell 12 percent in the southern Europe division, made up of Italy and Greece.
Across Europe many store groups are still struggling as government efforts to bring down national debts reduce consumers’ disposable incomes. Electrical retailers have been particularly exposed because they sell discretionary goods and face intense competition from supermarkets and internet giants like Amazon and eBay (EBAY.O).
But in Britain Dixons has benefited from a tablets boom, as well as the demise of rival Comet and problems at Jessops and HMV. It has also been cutting costs, revamping stores and seeking to improve products, prices and service.
James said that despite recent surveys and data showing improved economic conditions in Britain he remained cautious on the state of the market for the year ahead.
Shares in Dixons were up 3.34 pence at 47.68 pence at 1005 GMT, valuing the business at about 1.7 billion pounds.
($1=0.6399 British pounds)
Editing by Greg Mahlich and Mark Potter