CityBeat: Dixons under pressure
Glynn Davis looks at the increased competition facing the UK’s biggest electricals retailer
January 30 2003
About 18 months ago I visited Tesco’s HQ and was informed that the company was to aggressively target the electricals market – especially through Tesco.com. And not long after that John Lewis also suggested to me that this market was in its sights – and again, online would be involved.
Both companies indicated that Dixons would be a major casualty of their plans. It sounded ominous. It proved to be a good warning to avoid the company’s shares as they have gradually fallen – from their 12-month high of 267p – to below a pound this week.
It is probably fair to say that both Tesco and John Lewis haven’t really given Dixons that much trouble to date but the warning was there and other online players have undoubtedly chipped away at its market share. Strangely, it has never really held the Internet close to its heart – even Freeserve was a bit of a lucky break.
Signs that all was not well at the company came with its post-Christmas trading statement. Despite an 11 per cent rise in first-half profits it warned that the full-year would fall short after a disappointing festive period. Dixons’ chief executive John Clare reckoned that this was a general trend but this did not prove to be the case as some retail winners emerged.
So with big-ticket items likely to take a back seat as consumer spending continues to come under pressure and the threat of Tesco and John Lewis still on the horizon, Dixons is looking like a business whose shares even the charismatic Sir Stanley Kalms would have a hard job driving up.
Glynn Davis was previously a fund manager in the City, and has since become a business journalist specialising in the retail sector. He regularly contributes to national newspapers and specialist trade publications. email glynn@busicomm.fsnet.co.uk
