Dixons pins profit shortfall on weak consumer demand

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Dixons pins profit shortfall on weak consumer demand

Microscope contributor

Dixons is initiating a four point turnaround plan after warning that profits will be at the lower end of analyst expectations as consumer spending remains flaky.

In a trading update, the retailer said profit before tax for the year ended April will be £85m, compared to forecasts of £85m to £109m, sending its share price down nearly 17.5% at the time of writing to 13.81 pence.

In a statement, Dixons said UK and Ireland sales for the year to date, 25 March, fell 11% and 7% at group level.

"Consumer confidence across some of our markets is fragile and expect it to continue to be so through much of 2011," said chief executive John Browett.

 

As a result of the market dynamics, Dixons will review the operation in Spain and may pull out of the country, reduce capex to £160m in fiscal 2012 and £150m beyond, focus on cash generation and magic up cost reduction initiatives.

"Having previously outlined cost savings initiatives for the next two years we are now adding to these with £50m per targeted over the next three years to manage profitability," said Dixons.

According to Context, PC shipments in the UK channel fell 4% in the past 11 weeks including a 4% drop in consumer sales and a 5.5% decline in the consumer segment.

"The problems for the PC market were caused by falling consumer demand, particularly for notebooks. If you look at where Dixons is positioned, it's in the wrong place, selling the wrong products," said Jeremy Davies, Context CEO.

Related Topics: Desktop PCs, VIEW ALL TOPICS

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