UK 'Weakness' forces Dixons to cut costs

Originally posted: October 19th 2008.
Good news for geeks but not for shareholders

The price of a DSG share has fallen to 27p, an all-time low. Analyst Andrew Hughes, talking to The Independent, said that it is unlikely that they will pay a dividend in the next two years. Another analyst, John Baillie, said 'It is all doom and gloom for DSG.'
On April 13th 2008 John Clare, chief executive of the Notorious DSG, said dropping the 68-year-old name in favour of Curry's was 'an emotional moment' but a necessary change given that Dixons, the UK chain floated in 1962, accounted for less than 10 per cent of group sales. It was common knowledge, however, among customers and businessmen alike, that Dixons' reputation as a cynical money-taking concern with no effective after-sales service, necessitated the 'image upgrade'.
This blog's advice for those unfortunate to have blown their wages in a DSG shop and tried to return faulty goods, is to go straight to the County Court (small claims) rather than wrestle with the bouncers; but a neat alternative is to issue them with a moneyclaim for the refund plus interest. Visit http://www.moneyclaim.gov.uk/, which will navigate the rest for you.
Clare also insisted that Dixons Group was still committed to the Dixons chain despite its 'issues'.The chain is now struggling with fierce competition from supermarkets and falling gross earnings, which dropped by 0.6 per cent over the year.
Trading in the UK businesses (Dixons, PC World/The Tech Guys, Currys and The Link) has also been tailing off, making losses in the last quarter. Overall, sales at Dixons fell 14 per cent to a relatively tiny £688m. The Chief Executive said rising costs combined with an 'uncertain' outlook on 'consumer spending' would lead to lower profit in the current year than last year. It could be that their problem is simply that they are running out of uninitiated new suckers. They are cutting £30m from group costs this year, but still face rental losses of £27m, and plan to leave 12 out-of-town 'retail parks' to avoid paying rent.
There could be up to 800 job losses through the closure of two distribution centres and 'outsourcing' of back-office functions - possibly to developing countries, where Dixons' reputation has not yet reached, and where average wages tend to be lower. They will begin trading in Poland and Portugal this year and have also set up a franchise in Russia and Ukraine.
Update:　 2 September 2009- "Like for like" sales are down 15% at Currys / PC World. On BBC Radio 4, a spokesman for Planet Retail said "Their range and service is quite terrible."