PowerHouse triggers warranties price war

Electricals giant Dixons may be left out in the cold over extended warranties, following a decision by rival PowerHouse to overhaul its offer.

PowerHouse last week slashed prices and bolstered service promises in an effort to distance itself from consumer and competition authority concern about warranties, which generate sales of about£500 million a year for retailers.

Dixons has borne the brunt of attacks over warranties by consumer groups, and the controversy has prompted intense investor concern. PowerHouse's package will pile more pressure on the market leader.

PowerHouse financial services manager David Brock said his scheme was 'light years ahead' of competitors.

The retailer will offer a three-year extended warranty, from£9.99, on products costing less than£200, compared with an offer of£49 from Dixons.

PowerHouse also promises to resolve problems within one working day and guarantees a 14-day replacement service.

A spokesman for the Consumers' Association said: 'It's nice to see competition in the extended warranties market.'

But he pointed out that Adsa and John Lewis offer free warranties, eliminating the element of restricted, point-of-sale competition.

Seymour Pierce analyst Rhys Williams estimated that extended warranties account for at least 30 per cent of Dixons' profits and that the issue has massive implications for the group. Nobody at Dixons was available for comment.