17/01/2013 08:18 GMT

Dixons Posts 8% UK Sales Lift, But Investors Appear Unimpressed

Electrical retailer Dixons revealed an 8% rise in sales in UK and Ireland on Thursday, following high expectations for the chain in the aftermath of rival Comet falling into administration.

Northern Europe also faired well with a 11% sales increase, and Italian and Greek sales outperformed "weak" local rivals, according to chief executive Sebastian James.

James said in a statement that its multi-channel offering had gone down well with customers. Dixons Retail owns PC World and Currys, and took the decision last year to shut down after customers gravitated to the Currys and PC world websites.

"Customers continue to respond to our excellent range of products, compelling offers, seamless approach to multi-channel and improving service levels, and we continue to benefit from capacity exiting these markets.

"Tablet sales were phenomenal across our markets, which was good to see but which impacted overall headline margins somewhat. White goods were also strong, particularly in the UK."

James also touched on PIXmania - an ecommerce site Dixons acquired 77% of in 2006, which has since struggled to find a foothold - calling the operation "disappointing".

"(However), we are making good progress on our restructuring plans which are designed to put the business on a better financial footing," he continued.

"In the year ahead, while we will manage our cost base cautiously, we see many opportunities to improve the overall performance of our group through further developments in our service offer for customers, sharing best practice, controlling costs and focusing on multi-channel growth."

Despite the positive sales news, investors appeared to be unimpressed as its share price dropped 3% on Thursday morning.

Redmayne-Bentley stockbroker Lauren Charnley told the Huffington Post UK: "The group has been in the spotlight since the departure of sector peer Comet from the high street late last year, expectations have been that Dixons should flourish, picking up market share from its fallen competitor.

"The share price drop indicates that investors were potentially hoping for a little more from the electrical retailer, which warned that it continues to manage its cost base cautiously."

Nick Hood, business analyst at Company Watch, also predicted that investors would remain concerned about the ongoing issues with PIXmania, and wondering whether the arm will distract the management from the job at hand, or simply prove too expensive to put right.

"The ill winds at Comet blew sales across many retail parks to Dixons, adding to the bonus of an extraordinary surge in sales of tablets and turning Christmas into a truly festive time for a retailer in a deeply challenging marketplace. Stakeholders will hope that these commendable results don't turn out to be a one Christmas wonder," he said.

"Worryingly, a succession of heavy losses have sapped Dixons' financial strength, leaving it with a much reduced net worth, negative working capital and substantial debts. These combine to produce a vulnerable profile with a health rating of only 4 out of a possible 100, deep in our warning area."