John Clare: After the chain store massacre, will the lights go out on Dixons?

The electricals group may rebrand to escape the media's focus on its problems in the high street, as its chief executive explains to Abigail Townsend
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For all the cash and kudos they get, leaders of public companies, particularly blue chips, have many pitfalls to avoid. Demanding investors, opinionated analysts, fickle markets. But for John Clare, the chief executive of electrical goods retailer Dixons, the biggest headache right now is the press.

The group posted its full-year figures last week. A strong second half and solid performance from overseas operations helped the owner of PC World, Currys and The Link return an 11 per cent increase in pre-tax profits before one-off costs, to £331.6m, while turnover came in at £6.49bn. To round it off, the company announced a £200m sweetener for shareholders in the form of a share buyback.

Even so, the results presentation didn't quite go the way Clare had hoped. The news had been leaked that the finance director, Jeremy Darroch, was quitting for BSkyB, and a chunk of the announcement ended up being devoted to his departure.

But for Clare, it was the media coverage the results garnered that really rankled. Reporters chose to focus not only on the departing finance director, but on another dire performance at the Dixons high street chain and poor trading at the new-format xL stores. Critics grumbled that the group, despite having net cash of £342m, was returning only £200m to shareholders.

"Across the board, we did well," says an exasperated Clare. "We have one chain that is underperforming but because the name of the group is the same, most of the coverage revolved round it.

"Yes, we admit there are issues, but we're tackling them quickly and with vigour, and the story of the results overall was positive."

He also stresses that Dixons is not an overwhelming priority. "Dixons is small and insignificant. We have got a management team for whom Dixons is life and death but, at the top of the group, we're aware it would be nice to get it right, but the money and investment is going behind the bigger space."

Clare is so fed up, he is considering changing the name of the group altogether and expects to discuss the matter with the board shortly. "With the sort of coverage we have seen, there's an argument for having a name that reflects the nature of the group."

The reality, though, regardless of the coverage Clare would prefer, is that Dixons has some tough issues to deal with in the UK. Competition is fierce - from rivals, from online retailers and from supermarkets - and margins are thin.

Clare conceded there was a problem earlier this year when he announced the closure of 106 underperforming Dixons, leaving an estate of 214 and a bigger focus on out-of-town locations. Hence the recently launched xL. The xL chain consists of five stores but the two larger ones - 28,000sq ft outlets in Birmingham and Cardiff - are not performing well.

To remedy this, Clare is mulling two options. The first is to extend the product range or, should that not work, scale back the size. The new range will be in the shops for Christmas, but Clare won't divulge what it will contain, other than to dismiss suggestions made last week that furniture will be going on sale alongside the plasma TVs.

Part of the drive to get Dixons and xL back on track, and to bolster profits group-wide, is the relaunch of extended warranties - or services contracts, as Clare prefers to call them - later this summer. The Competition Commission investigated warranties last year, an assault Clare largely blames on the Consumers' Association.

"It was quite often a driver of the publicity against warranties," he complains, "saying they were poor value for money without understanding the broad range of service support that retailers were getting into. I'm disappointed we haven't been able to get closer to the Consumers' Association. It wasn't through want of trying."

Clare believes service contracts differentiate the Dixons group from its less specialist rivals and says they will feature heavily in advertising campaigns in the coming months.

"The web-based retailers can't do this, Tesco is unlikely to be able to and Argos is unlikely to be able to," he argues. "That's the space that specialist retailers have to create a difference in. It doesn't come for free, but we will give consumers a range of services."

Yet just as one part of the business comes off the authorities' radar, so another looms into view. August sees the introduction of the nattily titled Waste Electrical and Electronic Equipment Directive (even more unfortunately abbreviated to WEEE), giving consumers the right to return products to retailers for reprocessing. And for reprocessing, read recycling, not just a quick trip to the tip.

"We can understand the concept completely," says Clare. "But the problem of putting these good ideas into practice is that the rules are drawn up by people who don't know the business. It's going to come in and the industry is going to have to sort it out."

Clare says he has not yet been able to forecast how much implementation will cost but admits it could become "quite significant" for the industry. The British Retail Consortium estimates it could cost around £750m a year.

But Clare remains upbeat about the rest of the business and, in particular, its future in Europe. He is looking to expand the group's existing presence across the Channel through two formats, out-of-town electrical goods stores and PC World, which is branded PC City on the Continent.

Acquisitions would be nice - if any were available. One contender is the French chain Darty, part of the UK-listed Kesa. However, says Clare: "Darty is a business where it's difficult to see where and how you could drive shareholder value, particularly if you were paying a premium. So we have ruled out any short or medium-term acquisition."

The plan instead is organic growth, and around 10 per cent of group profits will be ploughed into new stores. This represents an investment of between £30m and £35m a year.

Back home, and, other than getting Dixons back on track and berating the media, Clare is also busy disagreeing that the group is a takeover target. (UBS caused shares to rocket after publishing a strong case but Clare disputes the bank's calculations.) He also has personnel matters to deal with.

The search for a new finance director is under way again. Clare remains unruffled, despite Darroch's departure just two years into the role. "Someone's come along and offered him a bigger job in a company that's got a bigger market cap than us and he's ambitious."

Not that Clare himself is likely to yield to such temptations, having been at Dixons for nearly 20 years now. The 53-year-old is swift to point out that he has worked at other places, but he concedes: "Generally, when people join this group, they either love it or hate it and they know quickly which it is. If they love it, people tend to stay." And for all the fickle consumers, changing trends, red tape and, of course, "bad" press coverage, Clare evidently remains one of those who love it.


Born: 2 August 1950

Education: Degree in applied mathematics (Edinburgh University)

1971: Sales executive at Mars

1983-85: Positions in marketing and business development at Ladbrokes

1985: Marketing director, Dixons chain

1986: Managing director, Dixons chain

1988: Managing director of Dixons Stores group following integration of Dixons and Currys. Joins Dixons board

1992: Group managing director

1994: Chief executive

Other positions held: non-executive director of property company Hammerson, chairman of the Ambition Retail task force, member of the National Employment Panel and member of the Edinburgh University development board