Not going according to plan
It looks like this is not a great time to be an electronics retailer in the UK. The market leader - Dixons Retail - released a warning today that profits for the financial year to 30 April are likely to come in at around £85 million.
Analysts had been expecting more like £106 million and Dixons Retail shares on the LSE fell by almost 18 percent this morning as a consequence of the warning.
John Browett, Group Chief Executive, 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 & Transformation Plan.
"Our Renewal & Transformation plan is working, customers are experiencing better store environments, improved ranges and increased levels of service. 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 that the Group can deliver an EBIT return of 3-4 percent over the medium term."
What he's essentially saying is that everything's still according to plan internally, it's just the darn market that's gone down the toilet. Furthermore, he's asking us to believe that the seven percent decline in like-for-like sales in the past 11 weeks still out-performed the wider market. Maybe it did.
Having said that, Browett has superimposed a new ‘four step plan' on top of the ‘Renewal & Transformation Plan', to account for the current market conditions. In essence this is a streamlining initiative designed to further reduce overheads and focus more than ever on the most profitable parts of the business. Good idea.
