Electrical Chains See Downturn

This week has seeen results dfrom both Kesa, Europes third largest electrical retailer and Dixons Retail, the UK’s largest electricals chain with poor results from both but with some small glimmers of good news there too.

Dixons Retail owns both the Currys and PC World stores announced a fall in both annual sales and profits today.

The group reported underlying pre-tax profits of £70.8m in the financial year 2011-12, down from £85.3m in 2010-11, although ahead of forecasts. Like-for-like sales, which exclude new store openings, dropped 3% on the year.

But the group also pointed to the fact that like-for-like sales were up 5% quarter-on-quarter, and said it was “well-positioned for the year ahead”.

Net debt almost halved to £104m from a year earlier.

Dixons added that it was “on target” to make a £160m repayment due in November following an agreement of a new credit facility with its banks last month.

Appliance and electrical retailers have faced tough competition from supermarkets and online retailers. On Wednesday, rival Kesa said profits almost halved in the past year.

Dixons said it was making good progress in the UK and Ireland and northern Europe, but this was offset by poor performances in Europe and at its online business Pixmania.

In the UK however like-for-like sales fell by 4% but underlying operating profits rose 15% to £78.8m which is good news for Dixons and is actually a signal that the business is on the right track.

Meanwhile yesterday Kesa expects sales in France, Italy and Spain to fall further as consumers continue to avoid or delay big-ticket purchases with the results of the ongoing euro zone crisis still up in the air.

Shares in Kesa, which owns the market-leading Darty business in France, fell 9.5 percent yesterday after it posted a 42% fall in full-year profit and slashed dividends.

Chief executive Thierry Falque-Pierrotin told reporters; “In France last year, the (electricals) market declined by around 4 percent. We expect it to decline further this year, mainly due to vision (TV sales) but maybe not to a 4 percent level,”.

“In Italy and Spain, the market declined double-digit (last year) and we still see it declining but maybe at a less dramatic level.”

Analysts have said Kesa could sell off of its loss-making businesses in Italy, Spain and Turkey.

Kesa made an underlying pretax profit of 59.0 million euros($75 million) in its 2011/12 year to end-April, in line with its guidance.

Kesa sold its loss-making British business Comet to private investment firm OpCapita for a nominal 2 pounds in February.

After taking exceptional impairment and restructuring charges of 70.5 million euros and booking a loss from discontinued operations of 274 million euros, Kesa made a total loss for the year of 314 million. In 2010/11, it made a profit of 30.7 million euros.

It ended the year with net debt of 126.5 million euros and halved its total dividend to 3.5 euro cents.

Kesa shares, a quarter of which are owned by activist investor Knight Vinke, have lost 63 percent of their value over the past year. They were down 5.25 pence at 50 pence by 1000 GMT, valuing the business at 243 million pounds.