DIXONS Retail, the owner of Currys and PC World, yesterday said it would slash costs as it issued its second profit warning in three months.
The firm said consumer confidence had deteriorated since the start of the year, especially in the UK and Ireland, hitting sales of big ticket electrical items such as flat screen televisions and laptops.
Full-year profits in the year ending 30 April 2011 are now expected to be £85m, around £20m less than it forecast in January.
Sales at stores in Britain and Ireland – which account for almost half of profits – fell 11 per cent in the 11 weeks to 26 March, the firm said.
Dixons said it was on track to slash costs by £50m in the current financial year and is hoping to save a similar amount in each of the next three years.
It also said it would consider a sale of its 34 Spanish stories, removing £5m of losses from its underlying profit before tax in 2010-11 and 2011-12.
Capital expenditure will be cut by £40m to £160m, although Dixons said it would continue to invest in new “big box” stores that combine its PC World and Currys brands under a single roof.
Net debt is expected to stand at £250m at the end of the current financial year in April, up from £215m at the half-year stage in November. The firm has a covenant test with its lenders in October.
Elkjop, the firm’s Nordic brand, offered a single glimmer of hope, with sales up nine per cent in the 11 weeks to 26 March. Revenues have jumped some 30 per cent over the last two years.
Shares in Dixons plunged on the news, closing 18.3 per cent down at 13.69p.
Other retailers also suffered on the news, as fears that the rise in the VAT and slumping consumer confidence would cause a fresh nightmare on the High Street. Home Retail Group, Kesa, Mothercare, Marks & Spencer and Next fell between five and two per cent.