16th Jan 2014 10:06
LONDON (Alliance News) - Electrical retailer Dixons Retail PLC Thursday said it saw strong sales growth over the Christmas period, as its UK and Ireland business continues to drive growth, but warned that it faces some tough comparables in the fourth quarter ahead.
The group has been streamlining to shed its loss-making businesses. It completed the sale of its French operation Pixmania at the end of December, the most significant of three disposals which also include Electroworld Turkey and Unieuro in Italy.
Dixons Retail said that it faces some tough comparables in the fourth quarter, ending April 30. The retailer has already annualised Comet's exit. It previously has reported a robust first half-half of the year boosted by the lack of competitors, after UK electrical rival Comet went into administration at the beginning of the 2012 Christmas shopping period.
"Last year we had a stellar Easter; it was also an earlier Easter. What we see coming up is a much later Easter, which will be tough. It's also tough comparables in terms of how we performed last year, and we are cautious of that," Chief Executive Officer Sebastian James told journalists in a call after the group's trading update.
The group said that it expects performance in the remainder of the financial year to be more modest than the year to date.
Dixons Retail said that total group sales grew 2% in sterling terms in the trading period November 1 2013 to January 4, with like-for-like sales up 3%. It said that group gross margins were down 0.5% over the Christmas period.
In the UK & Ireland, total sales were up 4% in sterling terms, with like-for-like growth of 5%. It said that growth was driven by sales of TV's and kitchen appliances.
Dixons Retail said that the "Black Friday" weekend was bigger than expected, something it will plan for further going forward.
"We had a stonking promotion on LG TV's on boxing day, and also HP laptops, so they were two of the biggest selling brands over the Christmas period. Kenwood kitchen equipment was also very popular, helped by the Great British Bake Off TV show, and with Apple's iPad Air we sold all we could get hold of," said James.
In Northern Europe, sales were down 1% in sterling terms, due to currency headwinds such as the pound-Norwegian kronor exchange rate, but were up 2% in local currency, and 2% on a like-for-like basis.
"This was driven by extremely strong trading in Sweden in Finland, despite tougher competition. In the Nordics we saw strong sales of phone and large domestic appliances. Tablets also showed stronger growth in the Nordics than in the UK," James said.
The group said that its smaller Greek business remains under significant pressure, reporting a like-for-like sales decline of 8%, although the business grew by 7% in sterling terms, and 3% in local currency, thanks to its wholesale business.
James said he is confident of the Greek business returning to growth at some point in the future, but did not put a date on it.
"We've got a big heating business in Greece, which means we are very weather dependent, and this year there was a chilly summer and warmer winter. Also it's still tough in Greece and the market is still under pressure. We are seeing signs of a flattening in that market, and in due course are confident that it will return to profitability," he said.
As well as streamlining the overall Dixons Retail business to get rid of loss-making operations, the group has also been considerably reducing the number of stores in its portfolio.
James said that the shifting trend in the way consumer shop is another reason behind the store portfolio reduction.
"In the past customers would make up to five trips to buy something like a TV. Now one or two of those trips have moved to the internet, which means lower footfall and higher conversion. We like that though, and that is here to stay, but it doesn't necessarily mean we have to reduce the number of stores we have. We believe our 380 to 400 stores is about right, but we will continue to review," James said.
He added: "We were far north of 600 stores five years ago, so we have already made substantial reduction in the number of stores, but we still have a way to go."
Interestingly, the group said that it will be launching a price comparison app later this year.
Shares in Dixons Retail were down 3.1% Thursday morning, trading at 48.85 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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