Dixons Retail on track to save £50 million

31 March 2011

31 March 2011 | Angeline Albert

Buyers at Dixons Retail said they are confident they can cut more costs as the company issued a profit warning.

The consumer electronics and computer retailer announced yesterday that profits would be about £20 million lower than expected this year, at about £85 million. This equates to a two per cent drop in like-for-like sales over the year to 26 March 2011. The trading statement said the fall was caused by tougher market conditions, particularly as a result of weaker consumer demand in the UK in the past 11 weeks.

In response to this, Dixon Retail’s retail support purchasing director Rob Douglas told SM his team is confident they can meet a cost reduction challenge set by the group’s board. The company has set an overall cost reduction target of £50 million per year for the next three years, and the trading statement said the company is on track to achieve £50 million cost savings in the 2010/11 financial year, which ends on 31 April.

Douglas said strategic sourcing activities carried out by the procurement team over the past four years have already resulted in 120 efficiency projects in 2010 that contributed to a saving of £25.1 million in the 2010/11 financial year. He said a further 93 projects were forecast to achieve just under £20 million in reduced costs for 2011/12. The rest of the savings are expected to come from elsewhere in the business.

“We have to make our cost base lean. We are in a strong position for next year to achieve more cost reductions for the group,” said Douglas.

Buyers’ demand management work will see energy reduction measures implemented in 100 more stores in the next financial year, in addition to the 100 stores that adopted the measures in 2010. They have also removed the large choice of company cars available from 25 to two more fuel-efficient models. The retailer expected to save £300,000 with the new contract, which starts on 1 April, Douglas said. 

For the group’s logistics supplier DHL Exel, buyers specified, during contract discussions, more double-decker trailers instead of single trailers, improved scheduling of deliveries to stores and a driver behavioural tool that would also help it save fuel and costs. The distribution contract, which will start in May, will save the group £2 million, Douglas said.

As reported earlier this month, procurement at Dixons Retail has saved more than £1 million by applying methodical demand management and encouraging behavioural change. Analysing and reducing demand from stakeholders has played a vital role in the success of projects to renegotiate telecoms contracts and reduce energy consumption, Douglas told SM.

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