Electricals market leader Dixons has issued a profits warning and detailed an emergency plan to put the business on track after dire trading.
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The market leading retailer, owner of Currys and PC World, reported that full-year profits are now expected to come in at about £85m as shattered consumer confidence took a toll on performance, particularly at its core UK business. In January the consensus was about £100m.
UK like-for-likes plummeted 11% in the 11 weeks to March 26 and there is no expectation of much change to the pattern of trading in the short term. Dixons expects a “modest decline” in the electricals market overall in its 2011/12 financial year.
Dixons chief executive John Browett set out a four-point plan in response to the tough conditions.
The retailer will “focus on winning markets and formulas”, which may result in an exit from Spain.
Capital expenditure will be devoted to the highest-return projects and will be cut to no more than £160m in 2011/12 and no more than £150m a year after that.
Dixons will focus on cash generation and undertake further cost reductions.
Browett said: “Consumer confidence across some of our markets is fragile and we expect it to continue to be so through much of 2011.
“As a result we are setting out the steps we are taking to secure the delivery of the renewal and transformation plan. Our business in the Nordics continues to perform strongly. The turnaround in Italy is improving the business.
“Notwithstanding the current tough conditions, we continue to make the business better for customers, easier for our colleagues and cheaper to operate and are confident the group can deliver an EBIT return of 3% to 4% over the medium term.”