Poor Christmas at Dixons prompts profit warning

Dixons confirmed City fears of a weak electrical goods market yesterday when it issued a profits warning caused by poor Christmas sales of items such as personal computers, wide-screen televisions and hi-fi systems. Nigel Cope, City Correspondent, reports.

Dixons shares crashed 10 per cent to 528p when the company said profits would be below market forecasts. Analysts reduced their estimates from as high as pounds 250m to around pounds 210m.

"Christmas was a bit of a shock," said Jonathan Clare, Dixons' chief executive. "A new Christmas trading pattern has become apparent with a greater proportion of consumers deferring large purchases until the January sale."

Sales in the eight weeks to 10 January were down by 4 per cent on a same- store basis. However, this was boosted by a surge in spending in the winter sales as customers delayed large purchases. In the six weeks to Christmas, Dixons' sales were down by 7 per cent. Sales of smaller gift items such as computer game consoles, software and camcorders were well ahead of last year.

Mr Clare said the problems were exaggerated by the building society windfall payments of the summer, which had "sucked forward" some spending rather than creating incremental sales. Higher interest rates were also dampening consumer demand, he said.

He added that the financial turmoil in the Far East was likely to have only a minor impact on consumer durable prices in UK shops as most goods were sourced in this country.

Dixons' announcement came as it reported a 34 per cent increase in first- half profits to pounds 77.1m. It also said that Robert Shrager, finance director, is to leave at the end of the financial year.

Separately, Monsoon, the women's fashion retailer, issued its pathfinder prospectus ahead of its planned pounds 350m flotation next month. It showed that in the six months to November, like-for-like sales were up 5 per cent. Analysts believe Christmas trading and the winter sale also went well, with sales 8 per cent up.

Hamleys, the toy retailer, confirmed reports of a late rush of shoppers this Christmas. December sales at the flagship Regent Street sales increased by 7 per cent. The Toystack stores saw sales rise by 6.6 per cent.

Investment column, page 26