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[June 26, 2014]
Dixons detects improved picture as it enjoys World Cup TV sales lift
(Guardian Web Via Acquire Media NewsEdge) Dixons Retail has detected long-awaited stirrings of a recovery in consumer spending as World Cup television sales helped it get off to a good start in the current financial year.
For the year ended 30 April, Dixons disclosed profit before tax, excluding one-off items and discontinued businesses, up 10% to £166m. Sales at stores open a year or more rose 3% to £228m.
Sebastian James, Dixons' chief executive, said the group was in a strong financial position as it prepared for its agreed merger with Carphone Warehouse. The first two months of the current financial year continued Dixons' encouraging performance from the previous year, he added.
"The new financial year has started well, with an uplift in TV sales driven by the World Cup, but we also believe we are seeing the early glimmers of a consumer recovery.
"On this there is no certainty just yet, but what we know for sure is that if we maintain a tight rein on costs, our pricing sharp – against all comers – and our service levels high, customers will continue to choose us over others." Strong growth in the wider economy has not yet flowed through consistently to the high street. Though the sector is past the dark days of the recession, when household names such as Woolworths failed, many retailers have reported weak sales suppressed by lack of consumer spending power after years of falling real wages.
After reporting strong Christmas sales in January, James was more gloomy. He warned that any consumer recovery was fledgling and that trading would remain tough.
Carphone Warehouse reassured investors with full-year earnings in line with forecasts, saying its weakness in its dealer business was balanced by strong demand for 4G contracts.
The group, which sold Virgin Mobile France in May, reported earnings excluding interest and tax of £151m, up from £132m, and in the middle of its predicted range of £145m of £155m.
It said the Dixons merger was progressing well, with the deal already approved by European regulators and a shareholder prospectus due to be published Thursday.
Andrew Harrison, chief executive, said: "The history of Carphone Warehouse has been one of anticipating change and positioning the business to take advantage of this change. Looking ahead, the shifts we see in the marketplace offer considerable opportunities to create value ... From a position of strength, we are planning to take greater advantage of these developments through our proposed merger with Dixons Retail plc." Revenues fell 2% to £3.28bn during 2014, owing to difficulties at its dealers operation, which sells phones to businesses through independent traders.
Weakness in Germany and Portugal led to a net 36-store closures, and the company ended the year with 2,024 outlets. Carphone opened 33 Samsung stores in seven countries, under a deal to operate standalone outlets for the South Korean manufacturer.
The company said it grew share in contract phone sales, as European operators switched on their 4G services and customers sought its advice for super-fast mobile.
"We were encouraged by customer take-up of 4G services as network infrastructure was rolled out more widely across the UK market during the year," Carphone said. "The significantly improved network quality and download speeds have encouraged customers to take richer data packages, which in turn drive increases in monthly line rental." (c) 2014 Guardian Newspapers Limited.
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