Dark days for electricals

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The electricals sector is facing yet more woe as the big players Dixons, Best Buy, Argos and Comet all post further dire performances. Strategies are being reviewed and the sector is alive with sell-off and take over rumours that, if true, would cause a massive shake up in the ailing market.

Dixons, which reported a 6% fall in profit and a 3% fall in UK sales today (23 June), is at the centre of a bid rumour from US retailer Best Buy. The rumour was said to “bemuse” analysts but true or not it gave Dixons shares a hike yesterday (22 June).

If Best Buy US were to take over Dixons, it’s unclear what this would mean for its joint venture with Carphone Warehouse in Europe, more on that later.

The Dixons Group, which also owns PC World and Currys has pulled up its socks in the past four years under its transformation strategy and despite its sliding sales and profit, has strengthened its position while its rivals can’t say the same.

Earlier this week, Kesa Electricals, which owns Comet, revealed that further sliding sales and profit at the UK chain was dragging down the overall group’s performance – despite the buoyant performance of the group’s Darty chain in France, which reported a 12% profit hike.

There has long been speculation that Kesa is planning to sell off Comet – something it didn’t rule out in its quarterly results statement. Instead its chairman said the group was working on turnaround strategy for Comet in parallel to looking at alternative strategic options which could include selling it to focus on the profitable Darty business.

In the mean time, as part of that turnaround strategy Kesa is looking to apply the Darty template to Comet in the hope that its winning strategy will reverse its fortunes.

But, just because a concept works in one region, doesn’t necessarily mean it will work in another – something that Best Buy has found out the hard way since breaking into the UK market last year with its European venture.

Carphone Warehouse, which owns 50% of the Best Buy Europe venture, last week revealed that it is to re-evaluate its multi-format/multi-channel strategy on the back of its losses tripling to £62.6m in the year to March.

Best Buy is one of, if not the, biggest and most successful retailers in the US. Its Big Box stores and blue shirted Geek Squad are practically a national institution, but something has been lost in translation and the concept has failed to take off here.

Its store-opening programme has been slower than anticipated, its sales performance lacklustre and it faced a mass exodus of senior management less than a year after opening.

Argos too blamed a “significant decline” in purchases of consumer electronics for its 10% drop in sales earlier this month.

How can it be that as the mobile and digital devices take over our lives and people covets technology products more, that the retailers that sell them can be faring so badly?

Consumers are strapped for cash and supermarkets and online retailers such as Amazon are eating into the once specialist market but would these retailers fare any better under different ownership?

One thing is for sure – if Kesa sells off Comet and Best Buy US swoops in on Dixons, it would certainly change the dynamic of the struggling market.

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