Dixons says closing Pixmania would have been more expensive than paying Germany's Mutares to take it on
Dixons Retail is paying a German industrial group €69m (£58m) to take the loss-making online retailer Pixmania off its hands.
Shares in the electrical retailer rose 7% after it revealed that France's Pixmania, where sales fell 32% in the first quarter, would become part of Germany's Mutares group. The City also welcomed an upbeat first-quarter trading update, in which Dixons said it had enjoyed an "encouraging start" to the year.
Chief executive Sebastian James said Mutares had a track record of turning businesses around, and that the cash sum Dixons was paying would be ringfenced to be invested in the future of Pixmania.
He said the business did not fit into Dixons plans of "a fully integrated multichannel proposition where we are the market leader" and that it needed "a different kind of entrepreneurial vigour".
The deal is expected to complete after a period of consultation with Pixmania work councils, in line with French labour codes. The retailer said the alternative of closing the business would have been more costly at more than €90m plus losses for a "year or two" while negotiations over closure took place.
The retailer also revealed plans to sell another loss-making business – its ElectroWorld operations in Turkey – to Bimeks, a Turkish electricals retailer, for £2m over two years.
It came as the group was upbeat about prospects in a first-quarter trading update.
Total sales were up 4% in the three months to 31 July, while like-for-like sales were up 2%. Gross margins were down 0.4% however, which Dixons said was down to its sales mix and a drive for better value for customers.
"There are some signs of economic recovery but we're pretty cautious in all of our markets," said James.
He added: "For the first four years of the recession I told my teams next year will be better. After four years I started saying it's going to be like this forever. It's genuine caution until we have proof of improvement."
In the UK and Ireland total sales rose 3% while like-for-likes were up 6%. James said he was pleased with that because it was achieved against some "tough comparables" a year earlier, when the Olympics boosted sales, and despite the hot weather this summer which he said kept people away from retail parks.
In northern Europe total sales rose 12% while like-for-likes increased by 5%, and in southern Europe total sales were flat while like-for-like sales fell 12%.
James said its southern European business was hit by colder weather in Greece and Italy, which hit sales of air conditioning units. Overall he said Dixons' Greek business was "in good shape", despite the "very challenging" economic environment.
"Dixons shares are off to a flying start following an update which confirms further growth and, of equal importance, consolidation," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
"The disposal of its two troubled units marks a welcome return to its core business. Furthermore, and despite tough comparatives, like-for-like sales and market share growth were strong."
Dixons RetailRetail industryAngela Monaghantheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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