View from City Road: Dixons' dilemma set to continue

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The Independent Online
John Clare, group managing director of Dixons Group, knows more than most about the difference between the two retail markets. He is spending one week in every four in the US trying to sort out Silo. Judging by yesterday's results, he should raise his quota.

He admits that Silo is a disaster and there is little prospect of rescue in its current format, but he still has no idea how it can be turned round. The results of the two pilot studies - the YES] Your Electronics Store in Rochester and four large Silo stores in Chicago - will not be clear until January. Even if they are successful, rolling them out to other areas will take time.

But the chances of their success look slim. If Silo suffers from being number three in a fiercely competitive market, it is difficult to argue that launching a new brand namewill lift profits. If its problem is that it is perceived as old-fashioned and expensive, moving to larger outlets will not automatically help. Its efforts to change that perception by price-cutting will only work if volumes can be significantly increased.

For the moment Dixons has to persevere, for financial reasons just as much as management credibility. Selling Silo - if a buyer could be found - would produce an embarassingly large loss. Closing the 185 remaining stores would be little better, given that the closures so far have cost almost dollars 1m apiece. But Dixons may eventually have to throw in the towel.

The uncertainty means that Dixons shares, down almost a third relative to the market since the start of the year despite a strong performance on the British high street, should be avoided.