Dixons steals Comet’s place in the spotlight

Elizabeth Fournier
THERE are two kinds of people in this world: winners and losers. And if the contrast between rivals Dixons and Comet’s recent luck is anything to go by, the same looks to be true of companies.

Luckily for Dixons, it looks like Comet’s demise has put the firm’s star firmly in the ascendant. Its shares are up more than 50 per cent over the past three months, and analysts are estimating that additional market share could top up the firm’s operating profit in 2013 to the tune of £30m.

Add better-than-expected interims, like the ones chief executive Sebastian James wheeled out yesterday, and you’ve got an investment case in no need of an extended warranty.

The UK performance looks particularly impressive against a less competitive backdrop, with underlying sales up three per cent and a return to profit after five long years. But as with so many firms that pushed to establish a European present, weakened consumer spending in Greece and Italy is stifling growth, dragging down sales in the Scandinavian market, where Dixons has been building its presence since the acquisition of local brand Elkjop 13 years ago.

Of course in the run up to Christmas the retailer will have a firesale at Comet to compete with, but as almost the last man standing in the high-street white goods market it seems to have won the hearts of the British consumer and is likely to end 2012 on a high – though further share gains are unlikely after such a strong recent performance.

Meanwhile fellow retail-park favourite Kingfisher is having problems a little closer to home.

Despite a hefty high-street presence in the UK, France is actually the B&Q owner’s biggest market, and half its profits come from the firm’s Castorama and Brico Depots on the other side of the channel.

Francois Hollande’s government has hardly been selling itself as the champion of business since its competitiveness pact just two weeks ago, when the President proposed a €20bn (£16bn) of tax credits to the corporate sector. This week has seen his industry minister, the ever-tactful Arnaud Montebourg, launch an attack on steel giant Lakshmi Mittal over his firm ArcelorMittal’s plans to shut down blast furnaces in the country’s socialist-dominated steel belt.

Now Kingfisher is complaining that Hollande’s lack of clarity on government spending – in particular his tax plans – has thrown France’s construction market into disarray, sending like-for-like sales at its trade-focused Brico Depots down 4.9 per cent. Chief executive Ian Cheshire yesterday called the outlook in France “very uncertain”. With analysts suggesting a worst-case scenario would see profits in the country downgraded by 30 per cent next year and a €130m tax , it’s hard to see a case for the shares – which have been bumping along unspectacularly for most of this year – making a significant break for outperformance anytime soon.

Elizabeth Fournier is news editor of City A.M. @ej_fournier