Dixons calls for cut in interest rates

The Bank of England should cut interest rates to avert a complete collapse in consumer confidence, the chief executive of Dixons urged yesterday.

The Bank of England should cut interest rates to avert a complete collapse in consumer confidence, the chief executive of Dixons urged yesterday.

John Clare, who was speaking as the electricals group defied doomsayers to report a strong Christmas, said he hoped such a cut would come "sooner rather than later".

After five interest raterises in the past 14 months, Mr Clare warned: "It's a different consumer out there than six months ago in terms of optimism and propensity to buy, and the Bank needs to be aware of that. It put up interest rates to take the heat out of the UK economy, and by God, the heat has been taken out of it."

Retailers have endured their worst eight weeks of trading for six years, industry figures showed this week. Economists expect the Bank's Monetary Policy Committee to leave the base rate at 4.75 per cent today.

Mr Clare's comments came as Dixons reported a 3 per cent rise in underlying group sales during the four weeks to 8 January. Negative like-for-like sales at PC World and The Link, its mobile phone chain, took the shine off strong sales growth at its Currys and Dixons chains.

Shares in the group edged 0.5p higher to 157p on relief that the group had limited the damage to group gross margins despite intense price deflation. Nick Bubb, an analyst at Evolution Securities, said: "Dixons has been a potential Christmas casualty, ever since the gloomy pre-close in November but the update and first-half results today are OK overall."

Sales of flat screen televisions, personal DVD players, internet audio players such as Apple's iPod and in-car navigation systems drove like-for-like growth of 8 per cent at Currys and 10 per cent at Dixons over the four-week festive period.

The popularity of MP3 players this year ate into mobile phone sales, last year's stellar performer. Underlying sales at The Link slumped 9 per cent, putting pressure on shares in Carphone Warehouse ahead of its post-festive update today.

Much cheaper computers hit underlying sales at PC World, which fell 3 per cent in the four-week period. Desktop PCs cost up to 20 per cent less than this time last year, Mr Clare said, reflecting the weakness of the US dollar and intense competition.

While Dixons' Christmas figures put it among the high street winners, its like-for-like sales growth has slowed since the first half of its financial year. Mr Clare said gross margins remained under pressure, hit by fewer customers using in-store credit offer and lower sales of margin-boosting warranties.

"The message is the consumer market has slowed and it has slowed quite rapidly. We are cautious about the consumer economy," Mr Clare said.