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
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.