Dismay as Dixons confirms poor Christmas with shock profits alert - Business News - Business - The Independent

Dismay as Dixons confirms poor Christmas with shock profits alert

High Street Gloom: Poor sales of consoles may be a harbinger of a wider slowdown in retail spending

Dixons sparked a sell-off in retail shares yesterday after the electrical stores group issued a shock profits warning and made gloomy predictions about the outlook for consumer spending.

Dixons shares fell 21 per cent to a five-year low of 116.5p when the company said it would miss profit forecasts for the current year due to falling margins and weaker-than-expected sales in the run-up to Christmas. The comments hit shares in rival retailers such asKingfisher and Carphone Warehouse, while shares in Marks & Spencer, Boots and Woolworths also fell sharply.

Dixons said its sales in December were below expectations due to weak sales of computer games and consoles while sales of extended warranties also fell in the face of an investigation by the Competition Commission.

Like-for-like sales in the UK in the eight weeks to 4 January showed no growth on last year while gross margins were lower due to the sale of a greater proportion of pre-paid mobile phones as opposed to more profitable fixed contracts. Dixons, which also includes Currys, PC World and The Link, said the January sale had started well but it remained cautious about the outlook.

John Clare, the chief executive, said: "We don't think our numbers are desperately bad but for three weeks in December we didn't see the consumer out there in the same numbers."

Explaining the change, he said: "Last December mortgage holders [on annual deals] got a letter saying their interest rate was going to be lower after the autumn reductions. I'm certain now that this had an impact on December spending last year because people were better off. We have a very different climate today. The consumer is starting to be affected by tax rises and pensions publicity. They don't feel as confident as last year. We feel quite cautious about big ticket items in particular."

With Next also reporting weak sales yesterday, one retail analyst said: "What you've got is two of the best retailers in the sector saying they've done flat like-for-likes in an environment which has low mortgage rates, low unemployment and booming house prices. God help us when things get really bad."

Mr Clare said Dixons would not now pursue an acquisition of Darty, the French electrical division being sold by Kingfisher, unless the economic outlook brightened. "Given the uncertainties we intend to focus on our existing UK and international businesses for the immediate future," he said. "Now is not the time to make another big European acquisition."

Kingfisher said it remained on course to separate its electrical division, which also includes Comet in the UK, by May. A demerger on the Paris stock market is the favoured route if no trade bidder emerges.

Dixons, which saw its founder Sir Stanley Kalms retire in September after 50 years with the group, said the weak performance from computer games had caught it by surprise.

Merrill Lynch said Dixons' gross margin attrition was a major concern as "the past 10 years shows that once lost, gross margin tends not to be recovered".

Mr Clare admitted this and said the cut-throat market meant it was unlikely to be able to raise prices. Jeremy Darroch, Dixons' finance director, said the group would look to improve its cost-to-sales ratio by reducing costs in distribution, systems and service support. Merrill Lynch has cut its full-year profit forecast from £321m to £290m.

Dixons also reported half-year results for the six months to 9 November. These showed an 8 per cent increase in pre-tax profits to £94.8m with like-for-like sales up 5 per cent on last year.

News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Sport
FootballFull debuts don't come much more stylish than those on show here
News
i100
PROMOTED VIDEO
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
News
The ecological reconstruction of Ikrandraco avatar is shown in this illustration courtesy of Chuang Zhao. Scientists on September 11, 2014 announced the discovery of fossils in China of a type of flying reptile called a pterosaur that lived 120 millions years ago and so closely resembled those creatures from the 2009 film, Avatar that they named it after them.
SCIENCE
Life and Style
tech
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Matisse: The Cut-Outs exhibition attracted 562,000 visitors to the Tate Modern from April to September
art
Life and Style
Models walk the runway at the Tom Ford show during London Fashion Week Spring Summer 2015
fashionLondon Fashion Week 2014
News
Kenny G
news
News
peopleThe black actress has claimed police mistook her for a prostitute when she kissed her white husband
Life and Style
techIndian model comes with cricket scores baked in
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Training Coordinator / Resource Planner - City, London

£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week