Dixons sets sights on Darty chain as it watches Kingfisher's troubles

Dixons, the electrical retailer, said yesterday that it was "observing Kingfisher with interest" following the well-publicised problems at Sir Geoff Mulcahy's retail group, which includes Woolworths, Comet and B&Q.

Dixons believes the jewel in Kingfisher's crown is Darty, its French electrical retail business, which Dixons covets. John Clare, Dixons chief executive, said: "If there was any scenario under which Darty became available then yes, we would be interested."

Asked whether a bid for Kingfisher might provide a route to Darty, Mr Clare said: "It would be risky." Dixons would not want B&Q and under competition rules it would not be allowed to own Comet as well as its own chains, which include Currys and PC World.

If Dixons were to make a move on Kingfisher it would mark a return to the hostilities between the two groups in the 1980s. Dixons launched a failed £1.75bn bid for Kingfisher when it was called Woolworths in 1986. Kingfisher hit back three years later with a bid for Dixons but pulled back when the attempt was referred to the competition authorities.

A final bid battle would also mark an appropriate swansong for Sir Stanley Kalms, the Dixons chairman and founder who is due to retire from the group next year.

Kingfisher's shares have been hit by its drawn-out process to demerge Woolworths. The appointment of Gerald Corbett, the former Railtrack chief executive, as chairman of Woolworths also plunged the group into a further crisis.

Dixons yesterday reported a 5 per cent increase in underlying profits to £277.8m in the year to April. Pre-tax profits were boosted to £647m, thanks to £400m in profits from the sale of its stake in Freeserve, the internet service provider, to Wanadoo of France. Group like-for-like sales at Dixons were 4 per cent ahead of the previous year, helped by strong sales of DVDs, widescreen televisions and digital cameras. But margins in the UK fell by 0.9 percentage points resulting from lower margins sales of "old technology" televisions and video recorders.

Dixons also plans a scheme scheme to reward its sales staff with commissions for selling customers higher-margins products.

Consumers could be concerned that the plan would encourage sales staff to push customers towards the goods they want to sell rather than the ones really wanted.

Dixons warned that the outlook for mobile phones and PCs had weakened. Mr Clare said the forecast was for 16m to 18m mobile phones to be sold in Britain this year, from 23m last year. In PCs, sales of desktop computers have fallen, while laptop sales have been rising.

The group also said it would create 1,300 UK jobs this year.

Shares in Dixons rose 0.25p yesterday to 231.5p.