Electrical giants face grilling over extended warranties

Britain's biggest electrical retailers will today face a grilling over their controversial extended warranties in an open hearing being held as part of the Competition Commission's investigation into the insurance products.

Both Dixons and Comet, Britain's two biggest electrical retailers, are due to mount a spirited defence of warranties, which critics say are often unnecessary and can add huge cost to the price of a product.

John Clare, the chief executive of Dixons, will say that modern extended warranties offer more cover than 12 month manufacturers guarantees, insuring against accidental damage and theft as well as technical fault. He will say that only half of Dixons' call-outs are technical with the rest ranging from plugs being put in the wrong sockets to babies putting biscuits in the video recorder.

But the Consumers' Association is due to continue its campaign against extended warranties, branding them a "rip-off".

Dixons, which has about 25 per cent of the extended warranty market, is thought to make about 40 per cent of its profits from warranty sales. The Competition Commission investigation has weighed heavily on the company's shares, which closed a penny lower at 100p yesterday.

The uncertainty over the outcome is expected to be prolonged after it emerged that the Competition Commission is likely to miss its 1 July deadline to send its report to the Department of Trade and Industry. The delay is due to the complexity of the subject with the Commission struggling to reach a firm conclusion on how broad or narrow the definition of an extended warranty should be.

Richard Ratner, an analyst at Seymour Pierce, said the delay meant the issue would "continue to dog the stock".

Separately yesterday, Dixons said profits for the year to 3 May would be in line with market expectations of between £280m and £300m. This compares with £297m achieved last year reflecting increased competition and weaker sales of higher ticket electrical goods as consumers rein in spending.

Nick Bubb, an analyst at Evolution Beeson Gregory, said: "It's a good job forecast have drifted down recently ... thus saving Dixons the embarrassment of another profit warning."