Analysis: What do Dixons' sell-offs mean for the retailer?

Dixons chief executive Seb James proudly told the media today the retailer had “sold enough memory to take two billion holiday shots” this summer as the popularity of digital SLR cameras boomed. James would do well to save a snap or two to celebrate today’s news.

The sell-off of two of the most problematic arms of the electricals group’s array of businesses is cause for delight and relief for Dixons’ management. The sale of its struggling Turkish ElectroWorld to local player Bimeks reflects Dixons’ failure to become market leader amid a vastly competitive market place featuring nine major players.

As Tesco has found in a number of its overseas ventures, retailers need to move rapidly to become the market leader in fragmented markets or risk getting swallowed up amid a flurry of price wars.

However, it is the irrevocable offer for Pixmania – meaning the paperwork is done but labour consultation is ongoing – from German industrial group Mutares which will be most satisfying for James.

The French pureplay has sustained considerable losses for some time and has sat uneasily in the group as James pursues being a “multichannel market leader” in every market in which Dixons operates.

He also moved to allay suggestions the €69m cash Dixons is injecting into the business bears a similarity to the £50m dowry paid by Darty to offload Comet to OpCapita last year before the retailer eventually collapsed. James said the money would be “ring fenced” to ensure the business’ future stability and added that Mutares has a strong history in turning around failing firms.

All of which leaves Dixons with just two remaining businesses causing James a headache. The first, its Greek business Kotsovolos, is battling the widely documented economic problems in Greece but remains the market leader.

The other, its Italian business UniEuro, is far smaller (with a 6% market share) and suffered over the summer as relatively poor weather left sales of air conditioning units lacklustre although its white goods and mobile sales were strong. “We are trying to think of creative ways in which we can strengthen that business,” says James.

But if southern Europe is giving Dixons a nasty case of sunburn, the Nordics are coolly driving sales. After engaging in what only the eloquent James could describe as some “vigorous skirmishes” with local private equity owned retailer Expert, Dixons delivered a 5% growth in northern European like-for-likes in the first quarter and has “won the war” over its rival.

“The ‘irrevocable’ offer on the ecommerce business, PIXmania, whose loss-making activity has been a persistent drag on Dixons’ group performance, and the agreed sale of ElectroWorld, which operates in the difficult Turkish marketplace, will enable Dixons to focus on driving growth in the healthier UK and Northern European territories,” says Conlumino retail consultant Liz Faulkner.

Which all leaves its UK business to quietly hum away as one of UK retail’s more unexpected turnaround stories. James and predecessor John Browett have revamped its offer to bolster service and create a strong multichannel offer, now featuring same day delivery.

The UK business delivered a 6% like-for-like growth in the first quarter and James points out that, stripping out the effect of Dixons.co.uk, which it closed last year, it would have been 8%.

But staying ahead in the UK against fierce competition relies on continual innovation. Its domestic business, led by UK chief executive Katie Bickerstaffe, has unveiled two new airport store concepts – at Gatwick and Heathrow – in the last month featuring a mix of carefully ranged products and natty design. This has been re-inforced by the opening of its new store in Bluewater shopping centre today featuring play tables - whereby customers interact with the products - which can be changed around depending on what is selling well.

Dixons remains a business in transition in a market which is also undergoing a transformation. Today’s disposals allow it to focus on taking on those challenges head on with its strongest businesses.