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Currys & Dixons

UK RETAIL
OPERATING AND FINANCIAL REVIEW

THE UK RETAIL DIVISION MADE AN OPERATING PROFIT BEFORE GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS OF £254.2 MILLION (2002/03 53 WEEKS RESTATED £238.0 MILLION), AN INCREASE OF 7 PER CENT.

Turnover increased by 4 per cent to £4,698 million (2002/03 53 weeks restated £4,525 million). The effect of the 53rd week in the prior year was to reduce year on year total sales growth by 1 percentage point. Like for like sales grew by 2 per cent.

Gross margins increased by 0.1 percentage points compared with the prior year. Better supplier
terms and improved accessory attachment rates contributed to margin improvement, although benefits were partially offset by a lower mix of service contract sales during the year. The division’s overall cost to sales ratio was flat year on year. Improvements in payroll and central department cost ratios were more than offset by rental inflation and increased investment in television advertising. The Group also began the roll out of new branch systems and has developed new supply chain management processes. These are expected to deliver significant future productivity improvements.

Product markets and market share
The UK Retail division’s product markets grew in value terms by 2 per cent overall. The brown goods market grew by 3 per cent with strong growth in new technology products including plasma and LCD TVs, DVD players and digital photography. Growth in these categories was partially offset by lower sales of games consoles, VCRs and 35mm photography. The white goods market grew by 2 per cent with strong growth in large white appliances, particularly refrigeration. The overall computing market grew by 2 per cent. The PC hardware market fell by 2 per cent, where strong unit volume growth was more than offset by price deflation, although there was continued strong growth in both the PC peripheral and PC accessory markets.

The mobile phone market grew strongly during the year, particularly in the second half, with total connections in the full year growing by an estimated 19 per cent. Growth was driven by prepay connections, although contract connections grew strongly in the second half.

The division continued to make market share gains in its core categories such as personal computers, flat screen TVs and large white goods. However, there were share losses in hi-fi systems, games consoles and photographic products.

Extended warranties
In December 2003, the Government announced that it had accepted the recommendations contained in the Competition Commission’s Report on extended warranties following its 15-month investigation. These reflect many of the Group’s policies and practices governing the sale of extended warranties. The Group hopes to see these features reflected in the implementing regulations when they are issued. The Group intends to relaunch its service offering during 2004.

Currys logo

More effective advertising, supported by higher levels of product availability drove footfall, conversion and sales growth. A restructure of store management completed over the summer increased staff availability in store and led to measurable improvements in customer service.

Currys sales chartThe Currys proposition was strengthened through a combination of successful product promotions, continued focus on range development and an enhanced service offering.

Performance improved steadily throughout the year and Currys achieved good sales growth in core destination categories such as plasma and LCD TVs, personal computers and large white goods. VCRs, games consoles and mobile phones performed less strongly.

Currys continued its relocation programme to larger out of town sites, opening or resiting 14 new stores during the period. Thirteen further new and resited stores are expected to open over the next 12 months.

Dixons logo

Dixons had a disappointing year, despite a good performance from the Group’s Tax Free stores. Sales suffered from a poor performance in some of its key markets, particularly games consoles and audio products. Performance was particularly disappointing over the peak Christmas season with little improvement in the fourth quarter.

Dixons sales chartIn January, a new management team was put in place to review the business, its cost structure and strategy. The first step was the announced closure of 106 unprofitable Dixons stores. On completion of the closure programme, the Dixons chain will have 214 stores.

The new Dixons management team is focused on improving performance. This includes realignment of store space around growth categories, simplifying operational procedures, more effective advertising and aggressive price promotions.

Trials of the new Dixons xL format continued during the year and further progress was made. Four new stores were opened in Birmingham, Swansea, Hull and Doncaster and two further xL stores are planned to open this financial year.

Currys
  Dixons  
Curys
  Dixons  

1. Service points in Currys stores provide customers with comprehensive delivery, installation, support and payment options.
2. A customer tries out a digital camcorder from the wide range available at Dixons, Bluewater.
3. Dixons, Bluewater.
4. Customers at Currys, Staples Corner, view the latest in LCD TV entertainment.