Home news Why not everything is doom and gloom in retail

Why not everything is doom and gloom in retail


Nuclear winter is supposed to have descended on the high street.

During every month this year apart from April, which was due to the late timing of Easter, fewer people have set foot on the high street or in shopping centres than in the same month last year.
According to the British Retail Consortium, retail sales rose in May at their slowest pace since April 2013, with sales of non-food products actually falling.
The latest figures from the Office for National Statistics paint a similar picture.
The volume of non-food items bought in May fell by 1.2% with the value of items bought rising by 1.8% only because of inflation.
A string of well-known retailers, in recent days, have delivered disappointing trading updates, including the likes of DFS, Carpetright and Debenhams.
:: Retailers count the cost of tough trading
Yet today, Dixons Carphone, one of the biggest high street players and the UK’s biggest retailer of electrical goods, has reported a 10% surge in full year pre-tax profits to a record £501m.
And in the UK, the owner of Currys, PC World and Carphone Warehouse reported a 4% rise in like-for-like sales – in other words, sales in those stores that have traded in the same format for more than a year and which do not take into account store openings or expansions.
These figures would appear to fly in the face of any supposed downturn.
They also confound the accepted wisdom that traditional ‘bricks and mortar’ retailers, saddled with higher running costs and taxes such as business rates, cannot possibly compete with the online behemoth Amazon or other digital retailers such as AO.com.
And they certainly call into question the theory that those selling ‘big ticket’ items, such as furniture and household goods, seem particularly vulnerable to a downturn in consumer spending.
So what’s going on? Well, part of the success of Dixons Carphone reflects the demise of some of its traditional competitors, such as Phones4U and Comet.

Image: Carpetright is among retailers to have reported struggles in the past week
Many people, despite the success of Amazon and AO.com and the popularity of websites offered by the likes of John Lewis, still like to buy electrical goods face-to-face on the high street or in shopping centres.
There is less choice for them than there was a few years ago.

At the same time, Dixons Carphone is now the only large scale high street retailer operating in all three areas of mobile phones, computing and white goods such as fridges, a benefit of the merger between Dixons and Carphone Warehouse which created the company in 2014.
That is an undeniable advantage and helps explain why Dixons Carphone has raised its market share in consumer electronics, white goods and computing, but not mobile phones, which has been challenging.
Other merger benefits have included the usual efficiency savings – not just stripping out duplicated costs but also initiatives such as shutting some old Carphone Warehouse stores and instead opening concessions in larger branches of the group’s other stores.
That helps explain why the total number of stores in the UK and Ireland has fallen from 1,271 to 1,148 during the last year.
But Seb James, the tiggerish chief executive, also argues that ‘self-help’ has contributed to this robust performance.
He argues the group’s pricing has got sharper and that the stores have become friendlier, with more staff providing technical assistance and support, rather than pushing warranties on unsuspecting punters.
Better service levels have also been accompanied by improvements to the store environments.
Yet this profits increase is not entirely down to the business being managed more sharply.
As much of the increase in operating profits at the business came from the company’s operations on mainland Europe as it did from the UK & Ireland – despite the latter accounting for nearly two-thirds of group sales – reflecting the translation into the weaker pound from continental currencies such as the euro.
So Dixons Carphone is also benefiting from external factors.
However, these numbers were much better than the market was expecting, which is why the shares are up.
Not everything in retail is doom & gloom right now.
:: Seb James, CEO of Dixons Carphone, will be on Ian King Live on Sky News at 6.30pm this evening.

Source: SKY