Government restrictions hit Dixons by stunting recent sales spark
Following government restrictions all UK Dixons stores closed on 24 March, which follows the closure of all Greek stores since 18 March. Almost all Nordic shops continue to trade.
Recent trading had been strong but the closures mean Dixons will no longer meet previous guidance for full year underlying pre-tax profit of £210m, or for net debt to be lower this year.
The group will decide if it’s to pay a full year dividend at full year results, once it has a clearer picture of the situation.
The shares fell 2% following the announcement.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown, comments: “Coronavirus is a problem for Dixons, with the expected loss of around £400m in sales from stores it’s been forced to close. Inevitably a sales hole that big can’t be filled, even if some customers now switch to the group’s online channels.
“As a result the group’s doing what it can to keep cash on the balance sheet, which is the right thing to do. Sadly as is becoming the norm across the market, the full extent of the financial damage simply won’t be known until we have a clearer picture. One thing to keep in mind is that if the pandemic results in a longer-term economic slump, Dixons’ sales could be challenged for a while.
“In uncertainty people are a lot less eager to upgrade their TV or washing machine.
On the plus side trading recently had been very strong, with a surge in demand for things like laptops and printers as people prepared to work from home, as well as fridges and freezers as people stocked up on food.
“It will help that the tills have been stuffed with more cash in recent weeks, but we’ll have to wait and see whether the extra padding offers enough protection as the current disruption drags on.”