This is what’s happening on the other side of the pond.
Dixons, a big UK electronics retailer, issued a sharp profit warning today due to deteriorating consumer confidence in Ireland and the UK. The company also said it may exit the Spanish market. The full announcement can be found here.
That things are bad in Ireland is well known. That inflation and austerity are beginning to take their toll in the UK is a brewing issue that will further complicate life for policymakers and Bank of England chief Mervyn King, not to mention give investors fits. Dixons shares are off 11% today.
From the Dixons announcement:
In the year to 26 March 2011 like for like sales in the UK & Ireland were down 3% versus a market that management believes to have been weaker. At the time of the Group’s trading statement in January, trading conditions were expected to remain difficult through the first half of the year, with consumer sentiment improving as we moved towards Christmas 2011. However, with consumer confidence even weaker than expected like for like sales in the 11 weeks to 26 March 2011 are down 11% in the UK & Ireland. In this more challenging trading environment the business has focused on cash gross profits and has held gross margins flat year on year. While this a relatively quiet period for the Group, management now expect that operating profit in the UK & Ireland division for the current financial year to 30 April 2011 will be approximately £70 million.
With continuing pressure on household budgets it is difficult to see a significant improvement in this pattern of trading in the short term and the Group is now planning on the basis that the consumer environment remains relatively subdued and that the electricals market overall shows a modest decline in the Group’s 2011/12 financial year.