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Dixons Retail PLC : Dixons eyes sale or closure of PIXmania

05/16/2013 | 05:58am US/Eastern
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Dixons Retail, Europe's second-biggest electrical goods retailer, said on Thursday it would like to sell its loss-making PIXmania e-commerce business and if that proved impossible closure of the operation was an option.

The group, also home to the Currys and PC World chains in Britain, Elkjop in Nordic countries, UniEuro in Italy and Kotsovolos in Greece, nudged its outlook higher on Thursday after reporting sales at stores open over a year up 7 percent in the fourth quarter to April 30.

That sent Dixons shares, which have already doubled over the last year, up 6 percent.

However, PIXmania, which operates in France and the Czech Republic, employing about 850, is dragging down the performance of the group as it battles the deeper economic problems that have kept much of Europe in recession for a year or more.

Though Dixons took full management control of the business last August and has since exited from half of the countries in which it operates, closed all its stores, exited noncore categories and cut about 700 jobs, it's like-for-like sales plunged 36 percent in the fourth quarter.

Independent retail analyst Nick Bubb estimates PIXmania's 2012-13 losses at over 40 million pounds ($61 million).

"We certainly would be interested in ways in which we could exit through a sale process," Finance Director Humphrey Singer told reporters. "I think closure in France is extremely difficult so it is right for us to explore all the other avenues before we contemplate that, but ultimately that is an option."

Chief Executive Seb James added: "We think it has some valuable assets as well, so we don't want to just throw things away if we don't have to."

The group said fourth quarter like-for-like sales rose 13 percent in the UK and Ireland, where the firm has benefited from the demise of rival Comet and strong demand for tablet computers. They were up 14 percent in northern Europe but down 5 percent in the southern division, made up of Italy, Greece and Turkey, where market conditions remained "extremely difficult".

Across Europe many retailers are struggling as disposable incomes are squeezed by rising prices, muted wages growth, and government austerity measures. Data on Wednesday showed the euro zone economy contracting for the sixth quarter running.

However, Dixons said underlying profit before tax, for the 2012-13 year was expected to be at the top end of analysts' forecast range of 75-85 million pounds.

It pointed out that 7.4 million pounds of pension costs were being reclassified as "non-underlying" meaning that the consensus range of expectations would rise to 83-93 million pounds.

"This strong year puts Dixons in the best position it has been in for many years," said James, highlighting a positive year-end net cash position.

Shares in Dixons were up 2.1 pence at 38.7 pence at 0900 GMT, valuing the business at 1.42 billion pounds.

"There is significant future profit opportunity as Dixons continues to gain more than its share of the Comet business and eliminates losses overseas," said Panmure Gordon analyst Philip Dorgan. ($1 = 0.6568 British pounds)

(Reporting by James Davey; editing by Kate Holton and Patrick Graham)

By James Davey

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