Dixons shuts third of high street stores and moves out of town

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Dixons is preparing to turn its back on Britain's high streets, starting by closing one-third of its flagship Dixons stores in a move that puts 1,000 jobs at risk.

The country's biggest electrical goods retailer yesterday revealed that within seven years all 320 of its traditional Dixons stores could vanish, in favour of a new enlarged format, Dixons XL.

The move went down well in the City, where Dixons shares rose 2.5p to 156p as analysts welcomed news of the closure of 106 loss-making stores over the next three months after sliding sales made their future untenable.

John Clare, the chief executive of the group that also owns The Link, PC World and Currys, said the decision had been prompted by the deteriorating performance of its Dixons stores over the crucial Christmas period. "Dixons has just had a poor year," he said, blaming price deflation and soaring high street rents.

The company hopes to relocate "a significant proportion" of the 1,000 staff who will be affected, but could not promise to find them all new jobs in its existing chains. Usdaw, the shop workers union, criticised the "considerable confusion" that the closures would create.

The decision came as Dixons revealed that UK like-for-like sales during the past six months had accelerated, rising by 6 per cent during its final quarter. During the year, underlying sales across its UK stores grew by 2 per cent, including an increase of 4 per cent over the Christmas period on the back of strong sales at PC World, The Link and Currys.

Highlighting the "disappointing" performance from its Dixons stores, Mr Clare said it no longer made sense to sell low-margin electrical goods from prime high street sites. He said competition for the sites from fashion retailers and fast food chains such as Starbucks was putting unsustainable pressure on the group's margins.

Despite admitting that sales at its Dixons stores were falling, he defended the brand's future. "Dixons in the market has a future but the individual stores over the course of 10 years won't exist," Mr Clare said, referring to his eventual intention to close the remaining 214 sites. He plans to replace them with 130 Dixons XL stores, but said the group was not yet ready to "push the button on the accelerating their roll out". It is testing five larger-format stores, which are located away from the traditional high street. It plans to open a further three or four during the next 12 months, eventually opening between 10 and 12 each year.

It said it would take a £48m charge to cover the cost of closing the 106 sites, which have combined sales of £185m, including cash costs of £22m. The bulk of the money had been earmarked to pay rents on the sites until they could be sold.