June 20 (Bloomberg) -- Dixons Retail Plc, the largest U.K. electronics retailer, reported a profit gain that beat estimates as it benefited from the collapse of the rival Comet chain, and signalled signs of improvement in the consumer economy.
Underlying pretax profit rose 15 percent to 94.5 million pounds ($146 million) in the year ended April 30, the Hemel Hempstead, England-based company said today in a statement. That exceeded the 88.1 million-pound average estimate of 13 analysts in a Bloomberg survey and helped the company eliminate its debt.
While the economic backdrop remains tough, Dixons Chief Executive Officer Sebastian James said he’s seeing the “faintest glimmer” of improvement, with shopper numbers and average prices both rising. Dixons has taken about a third of the business of Comet, which went out of business in November, and also benefited from growth in demand for tablet computers.
“Dixons continues to gain more than its share of the Comet business,” said Philip Dorgan, an analyst at Panmure Gordon & Co., describing the results as “stonking.”
The shares advanced as much as 3.5 percent in London and were up 1.2 percent at 42.84 pence at 8:54 a.m. That extended their gain this year to 51 percent.
The owner of the Currys and PC World chains ended the year with net cash of 42.1 million pounds, compared with debt of 104 million pounds 12 months previously. The shift to net cash was achieved about a year earlier than expected, Dorgan said.
Dixons plans to focus on growing sales rather than acquisitions, James said on a conference call.
“We’re optimistic we can take this wind in our sales and continue to drive this boat forward,” the CEO said.
Tablets sales surged, with red being a popular color, James said. Further growth in the category is likely this Christmas as less than a third of households own one, he said.
Business in southern Europe is “very tough,” the CEO said, with no signs of recovery in Greece, where Dixons is market leader. The priority in Italy is to “stop the bleeding,” he said, while the retailer continues to look at all options for its online unit Pixmania after closing all its stores, reducing staff and exiting product categories.
Resolving these strategic challenges are the company’s main focus above paying a dividend or repaying outstanding bonds, Finance Director Humphrey Singer said on the call.
“It’s an aspiration we absolutely need to be heading towards,” James said.
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