Dixons Retail (LON:DXNS) (27p and 4.8% of JIC portfolio) issued a trading statement for the12 weeks to 6th January 2012. I admit to being a little apprehensive ahead of this statement given the news in the last week of HMV and Blockbuster UK going into administration. I think the statement shows that the recovery at the business, with the exception of Pixmania, is proceeding well with strong like for like sales, helped along by "phenomenal" tablet sales.
Like for like sales growth in UK and Ireland was 8% and in Northern Europe was 11% . Southern Europe (Italy, Greece and Turkey) which accounts for about 12% of Dixons sales saw like for like sales, not surprisingly, fall some 8%. Pixmania which accounts for about 6% of Group sales continues to be a thorn in the side but management say that the restructuring plan to improve its financial position progresses.
Group gross margin is down by about 0.5% reflecting product mix; margins on tablet sales are pretty tight. The Company says full year profit before tax for the year ending April 2013 should be in line with market expectations of between £75 and £85m.
I think Dixons have made huge progress over the last few years in getting its real estate right, improving its product offering and both pre and after sales service. It is my view that there is a place for an electrical/technology retailer with a physical presence, (not everything will be bought on-line) and Dixons, with PC World and Currys is rapidly becoming the last man standing. These figures will not have benefited much form the closure of Comet as it was running clearance sales up to Christmas; the gains should come this year.
On consensus forecasts the shares are rated at 22x April 2013, falling to 12x April 2014 and 9.8x April 2015 which seems to me to be good value given the growth rates forecast. I think the shares will make further progress this year and am a happy holder.
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