Dixons hit by fall in mobile phone sales

Published on Wednesday 9 January 2002 00:00

CONSUMER electricals giant Dixons has turned in a lower set of profit figures for the last six months because of weaker mobile phone sales and start-up losses at European operations.

But good gains in sales of entertainment products and kitchen appliances offset some of the losses in PCs and mobiles - about 40 per cent of turnover .

Although turnover increased 2.3 per cent to 2.22 billion, pre-tax profit for the six months to November 10 dropped to 87.4 million from 90.8m last year.

Operating profits before exceptional items at the UK retail division rose three per cent to 72.9m.

Chief executive John Clare said: "It’s really a story of the mobile phone market, because that market is substantially off year-on-year." He added that overall trade had "probably been a little bit worse than we thought".

International retail profit fell to 7m from 14.6m due to costs of between 8m-9m in starting new operations, Dixons said.

Updating on trade over the Christmas period, Dixons said the eight weeks to January 5 had seen retail sales move ahead by four per cent, but saw like-for-like sales drop by 0.6 per cent. Gross margins rose by 0.4 per cent following supply chain improvements and the introduction of new store layouts.

Dixons, which said it would create 1400 jobs through general expansion over the next six months, said festive trading had been in line with expectations, adding that it was confident of a satisfactory outcome for the year, depending on economic conditions. The figures also met analysts’ expectations.

Dixons saw strong sales on items such as large-screen televisions, electronic games, DVDs and electrical appliances, adding that sales at its PC World division had generally improved.

Sales at The Link mobile phone business were hardest hit - falling nine per cent to 161m following a 41 per cent rise a year earlier.

PC World sales grew by five per cent to 581m, although the figure was down two per cent on a like-for-like basis.

Elsewhere, comparable figures for Currys rose by four per cent, with total sales reaching 751m.

Dixons sales, at 377m, fell one per cent following the temporary closure of almost 100 stores for refurbishment and the closure of some smaller stores.

Like-for-like sales were up one per cent after being affected by a significant reduction in customer traffic at airport stores following the September 11 terrorist attacks.

Excluding mobile phones, Dixons said its like-for-like sales in Britain were ahead nearly six per cent. Sales in Continental Europe, where start-up losses hampered profits, grew by 20 per cent.

Commenting on the half-year figures, Dixons chairman Sir Stanley Kalms said: "The group produced another solid set of results despite the significant decline in both the mobile phone and PC markets. Whilst there remains short-term

term uncertainty, new technology is set to be one of the strongest areas of consumer expenditure."

Dixons said the PC market had been "significantly weaker" but finance director Ian Livingston believed there were already signs of a recovery.

He added mobile phone sales had suffered because of comparisons with strong figures achieved a year earlier. Mr Livingston said: "Everyone knew the mobile phone market would be tough. 2002 will be a steady year and beyond that we will see the advent of the next generation of mobile phones.

"Then we might see a bit of a pick up but we won’t see the level of sales seen in 2000."

China is set to overtake Japan as Asia’s biggest market for personal computer sales in 2003, research firm International Data Corp said today.

IDC said China was on track for sales of 13.2m PCs in 2003, compared with a forecast 12.7m unit sales in Japan. Leapfrogging Japan would make China the world’s second-biggest PC market after the US.