Dixons loss widens in market faring worse

LONDON Thu Nov 24, 2011 10:06am GMT

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LONDON (Reuters) - Dixons, Europe's No.2 electrical goods retailer, posted a smaller than feared first-half loss as market share gains helped it to limit the impact of weak consumer spending and ease fears about its financial position.

Chief executive John Browett said on Thursday the euro zone debt crisis had rattled consumers' confidence and led some to rein in spending on discretionary purchases.

However, the situation was not as bad as in 2008-9 following the collapse of U.S. bank Lehman Brothers, he added.

"There's no panic among our customer base. People are a little more cautious. We're seeing some impact on our sales, but nothing disastrous, even in Italy," he told reporters.

European shoppers have been curbing spending as their disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures.

Electrical goods chains such as Dixons and European No.1 MediaMarkt Saturn are facing extra pressure from cut-price competition from internet retailers and supermarkets.

Earlier this month, U.S. group Best Buy abandoned plans for a chain of European megastores, while Kesa Electricals effectively paid a bidder to take loss-making British chain Comet off its hands.

Dixons, home to the Currys and PC World chains in Britain, said it made a loss before tax and one-off items of 25.3 million pounds in the 24 weeks to October 15.

That compared with a loss of 6.9 million pounds the same time last year, but was ahead of analysts' average forecast for a loss of about 30 million pounds.

Sales at stores open over a year fell 3 percent in the second quarter, improving on a 7 percent drop in the first.

Browett said that was partly due to easier comparative figures from the year before, but also to healthy demand for computers during the "back to school" period.

"When customers want to go out and buy, they've got the money. This is about confidence, not about whether people have got the money," he said on a conference call.

SHARES BOUNCE FROM LOWS

Dixons, which also runs UniEuro in Italy, Kotsovolos in Greece and Elkjop in the Nordic countries, said net debt fell over 70 million pounds to 143 million.

"The balance sheet is under less pressure than the bears had feared," said independent retail analyst Nick Bubb, who also welcomed the reduction in Dixons' losses in Britain.

"But the group is still badly exposed to the economic problems of Southern Europe (via its loss-making operations in Italy and Greece), and the wretched 'E-commerce' business has moved into loss," he added.

Browett said Dixons had "more than enough" headroom to meet quarterly tests of its borrowing rules.

The group's shares, which slumped to a three-year low of 9.245 pence on Wednesday amid concerns over its financial position, had bounced 11 percent to 10.43 pence by 0930 GMT.

Browett estimated like-for-like sales in Europe's electricals goods market fell 7-8 percent in the first half of its financial year, compared with Dixons' decline of 5 percent.

Dixons has outperformed rivals in part thanks to a store revamp programme focussed on more popular megastores. It has also slashed costs.

Browett saw little if any impact from the closing down sale of Best Buy's 11 British stores, and tipped Apple's iPad2 tablet computer and Dr Dre headphones as top sellers this Christmas.

(Editing by Will Waterman)

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