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Dixons issues profit warning

Electrical retailer's shares take a hit as it announces poor Christmas trading figures, despite major ongoing IT investment in key multichannel strategy.

By Miya Knights, 3 Jan 2008 at 15:08

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The UK's largest electrical retail group Dixons Store Group International (DSGI) has issued a profit warning after announcing poor pre-Christmas trading sales.

It has taken a 22 per cent hit on its London Stock Exchange-traded shares after today admitting sales were down one per cent compared to last year on a like-for-like basis, saying laptops sold slowly in comparison to games consoles and digital photo frames.

Sir John Collins, DSGI group chairman, said in a statement that "generally weaker consumer environments across many of our markets" had affected this key trading period during which it makes over half of its profits, but that total Group sales were up five per cent.

He continued: "This weaker trading, together with a more cautious outlook for the balance of the year, means that we now expect full year profits before tax to be some £40 to £50 million lower than current expectations."

The warning comes despite major investment in a multichannel strategy that saw major investment in both its Currys stores and online Currys.digital, Dixons and Pixmania operations.

In September 2007, it launched a five-year, £50 million investment programme in new technical customer support services it said would create around 2,000 jobs in standalone and PC world locations.

While in April, it took on new independent customer review services from provider Reevoo to attract more visitors to the newly launched standalone online, Dixons.co.uk e-commerce website.

At the time, Dixons e-commerce director, Devere Forster said such investment would allow the group to concentrate on completing the integration of its controlling 77 per cent interest in Fotovista Group, bought for approximately £185 million in April 2006. Fotovista is the parent company of Pixmania, the pan-European digital photographic and consumer electronic e-tailer.

Indeed, its e-commerce arm provided DSGI's most positive pre-Christmas result, with Dixons.co.uk and FotoVista posting a total sales increase of 31 per cent year-on-year, from what Collins said had been "a strong base."

DSGI is also one of only four per cent of retailers in the Europe, Middle East and African (EMEA) region surveyed by analyst Martec International last year to outsource most of its IT operations in a $335-million (£169-million) deal signed with India's HCL in January 2007.