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.
OPERATING AND FINANCIAL REVIEW
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
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
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.
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 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 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.
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
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.