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Dixons issues profit warning | Back |
Dixons Retail has issued a profit warning following a collapse in consumer confidence and unveiled a four-step action plan to counter it.
The retailer - parent company of Currys, Currys.digital, PC World and Dixons - said it now expects to post underlying pre-tax profits of around £85 million in the year to April 30.
“Consumer confidence across some of our markets is fragile and we expect it to continue to be so through much of 2011,” said group chief executive John Browett.
“As a result we are setting out the steps we are taking to secure the delivery of the renewal and transformation plan.”
He added: “Our renewal and transformation plan is working, customers are experiencing better store environments, improved ranges and increased levels of service.
“Notwithstanding the current tough conditions, we continue to make the business better for customers, easier for our colleagues and cheaper to operate and are confident that the group can deliver an EBIT [earnings before interest and taxes] return of three per cent to four per cent over the medium term.”
The store group particularly noted the deterioration in consumer confidence in the UK and Ireland.
Here, like-for-like sales were down three per cent in the year to March 26. At the time of the group’s trading statement on January 13, it said it expected trading conditions to remain difficult through the first half of the year with consumer sentiment improving towards Christmas.
That, however, is unlikely to be the case. Consumer confidence has been even weaker than expected with like-for-like sales in the 11 weeks to March 26 down by 11 per cent in the UK and Ireland.
The group now expects operating profits for the two countries in the year to April 30 to be around £70m.
“With continuing pressure on household budgets it is difficult to see a significant improvement in this pattern of trading in the short term and the group is now planning on the basis that the consumer environment remains relatively subdued and that the electricals market overall shows a modest decline in the group’s 2011/12 financial year.”
In the first of its four-step emergency plan, the group will focus on expanding what has been a winning format of two-in-one electrical and computing stores. These stores, it said, deliver gross margin uplifts of 20 per cent. It said it was also reviewing its Spanish business and said one option would be to withdraw from store operations in the country – a move that would end losses of around £5m.
Secondly, it will focus capital expenditure on projects likely to give the highest returns and will reduce capital expenditure over all to no more than £160m in the 2011/12 financial year and £150m a year thereafter. To do this, it will give priority to transforming stores that present it with the best opportunities.
Its third step will be to focus on cash generation and, fourth, to look for additional ways to cut costs.
The retailer - parent company of Currys, Currys.digital, PC World and Dixons - said it now expects to post underlying pre-tax profits of around £85 million in the year to April 30.
“Consumer confidence across some of our markets is fragile and we expect it to continue to be so through much of 2011,” said group chief executive John Browett.
“As a result we are setting out the steps we are taking to secure the delivery of the renewal and transformation plan.”
He added: “Our renewal and transformation plan is working, customers are experiencing better store environments, improved ranges and increased levels of service.
“Notwithstanding the current tough conditions, we continue to make the business better for customers, easier for our colleagues and cheaper to operate and are confident that the group can deliver an EBIT [earnings before interest and taxes] return of three per cent to four per cent over the medium term.”
The store group particularly noted the deterioration in consumer confidence in the UK and Ireland.
Here, like-for-like sales were down three per cent in the year to March 26. At the time of the group’s trading statement on January 13, it said it expected trading conditions to remain difficult through the first half of the year with consumer sentiment improving towards Christmas.
That, however, is unlikely to be the case. Consumer confidence has been even weaker than expected with like-for-like sales in the 11 weeks to March 26 down by 11 per cent in the UK and Ireland.
The group now expects operating profits for the two countries in the year to April 30 to be around £70m.
“With continuing pressure on household budgets it is difficult to see a significant improvement in this pattern of trading in the short term and the group is now planning on the basis that the consumer environment remains relatively subdued and that the electricals market overall shows a modest decline in the group’s 2011/12 financial year.”
In the first of its four-step emergency plan, the group will focus on expanding what has been a winning format of two-in-one electrical and computing stores. These stores, it said, deliver gross margin uplifts of 20 per cent. It said it was also reviewing its Spanish business and said one option would be to withdraw from store operations in the country – a move that would end losses of around £5m.
Secondly, it will focus capital expenditure on projects likely to give the highest returns and will reduce capital expenditure over all to no more than £160m in the 2011/12 financial year and £150m a year thereafter. To do this, it will give priority to transforming stores that present it with the best opportunities.
Its third step will be to focus on cash generation and, fourth, to look for additional ways to cut costs.
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