Christmas Cheer for Dixons Retail


LONDON -- This morning, Dixons released a trading update for the 12 weeks ending Jan. 5, 2013, with the news that the company saw like-for-like underlying sales increase 7%.

The specialist multichannel electrical retailer and services company has gained market share since the demise of Comet, whose administrators have been holding clearance sales. But consumers flocked to Dixons over the Christmas period despite the bargains on offer elsewhere, with tablet sales in particular described as "phenomenal" by management.

As the company is the market leader in Europe, it wasn't a surprise to see the key performer being Northern Europe (Nordics and Central Europe), which reported like-for-like growth of 11%. The U.K. and Ireland wasn't too far behind, with an encouraging 8% leap in LFL growth.

Southern Europe -- businesses in Italy, Turkey, and Greece -- saw drop-offs of 8% in LFL growth compared to the same period in 2012, but this was expected what with the events in the eurozone over the last year, with Chief Executive Sebastian James commenting: "In Italy and Greece I was pleased to see our businesses trading ahead of weak local markets and continuing to manage profitability robustly."

Elsewhere, Dixon's French retailer PIXmania had a poor period affected by the ongoing restructuring of the business, with sales falling 25%, compounded by significant negative trends in its main markets. Management remained upbeat for the single-channel business, though, with James saying: "We are making good progress on our restructuring plans which are designed to put the business on a better financial footing."

James continued:

Customers continue to respond to our excellent range of products, compelling offers, seamless approach to multi-channel and improving service levels, and we continue to benefit from capacity exiting these markets. White goods were also strong, particularly in the UK... In the year ahead, while we will manage our cost base cautiously, we see many opportunities to improve the overall performance of our Group through further developments in our service offer for customers, sharing best practice, controlling costs and focusing on multi-channel growth.

Despite the Christmas cheer, group gross margins were down 0.5%, primarily driven by product mix according to management. Shares in Dixons dropped to a low of 25.5 pence in early trade this morning, but have since rebounded to gain 1% at the time of writing and reach 27.38 pence, suggesting that private investors weren't wholly convinced by the trading update -- especially in the Southern European businesses -- but might see enough potential closer to home and in Northern Europe to find a potential buying opportunity.

As recently as last year, Dixons' shares hit a low of 9.56 pence -- shareholders who invested in the company at that time would have seen their holdings multiply almost three times now. So it may pay to keep an eye on the group's continued recovery...

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