Dixons repeats warning on consumer slowdown

UK-based electrical retailer has again cautioned that it expects a slowdown in consumer spending and decreased prices to hit profits in the remainder of this year.

Dixons Group plc's trading statement warned that gross margins were down 0.6% on last year as a result of "lower credit commissions, higher business to business sales and changes in product mix."

Though gross margins in the second half were down 0.5%, they were an improvement on the first half when margins were down 0.7%.

John Clare, Chief Executive, commented: "We are cautious about the prospects for our markets over the next twelve months. Price deflation continues to be a factor, which, combined with cost inflation and a cautious UK consumer, means that the environment will be very challenging."

He said: “When we updated the market in November and January we cautioned that we were seeing a slowdown in consumer expenditure. We have managed our businesses accordingly and have focused on margins, costs and service. We have been equally unwavering in our continued focus on our customers. Against this challenging backdrop, I am pleased that the Group has been able to deliver another year of progress. We expect that our full year results will be in line with current expectations."

Dixon's total group sales for the 52 weeks ended 30 April 2005 were up 8% with the group's like for like sales up 2%.

"Sales performance across our retail brands was mixed, with Elkjøp, Currys, Dixons and our investment businesses, PC City and Electro World, performing well," said Mr Clare. "PC World sales were adversely affected by price deflation, which impacted the computing market, although we made encouraging market share gains. In the second half, with sales up 29%, our international operations reached an important milestone, contributing one third of Group sales for the first time."

The company's performance includes strong sales growth of 24% from the Group’s international operations, which spans 12 countries outside the UK.

However, total UK sales were up 3%, this Dixon's said, reflected a weaker consumer environment in the second half of the financial year.

Dixons Group’s full year results will be announced on 22 June 2005.

(SP)