Dixons increases gross margins - FT.com Dixons Retail, the electricals group, became one of the few UK retailers to improve gross margins over the crucial Christmas trading period despite ferocious discounting on the high street. John Browett, chief executive, said although UK sales from stores open at least a year fell by 7 per cent year-on-year in the 12 weeks to January 7, the gross margin - the difference between the price at which a retailer buys and sells a product - rose by 0.4 percentage points. Mr Browett attributed this to Dixons selling more products at full price and having to mark down less in the sale. It also sold more higher margin services, such as setting up laptops for customers in stores, and controlled costs. This is not that we have put the product prices up. Our prices are the sharpest they have ever been, " he said. For the group as a whole, gross margins were flat year-on-year for the period. Dixons said total underlying sales fell 3 per cent, while sales from stores open at least a year fell 5 per cent in the 12 weeks to January 7, year-on-year. Sales were strong ahead of Christmas, with sales of tablets such as iPads and Kindles up 200 per cent. It sold a Kindle every three seconds. Sales of coffee machines also rose 80 per cent, while sales of headphones were also strong. However, the sale period from Boxing Day onwards was distorted by the VAT increase on January 1 2011, which brought sales forward, with UK like-for-like sales up 2 per cent from January 1 to 14. Indications were that sales were stronger compared with the period post the VAT rise last year, with like-for-like sales from January 4 to 14 up 23 per cent. However, it would take some time for the full picture to emerge. Online sales were also strong, up 20 per cent in the UK. There were also indications that conditions were stabilising in Greece, but the "swing factor" would be Italy, where consumers were grappling with the impact of a tax increase. Mr Browett said UK consumers were being "very sensible," prepared to spend on new technology such as iPads but holding back more where technology had "run its course," such as GPS systems and gaming. He was cautious on this year but said he was "encouraged by what we have seen in the last couple of weeks," while the Olympics, Euro 2012 and Diamond Jubilee could all boost demand. All of these things we think will help us a little bit, but we are not being Pollyannaish. We need to take a cautious approach," he said. Dixons has also benefited from US retailer Best Buy deciding to abandon the UK market and Comet being sold to a buy-out firm. Mr Browett said Dixons had not yet had the full benefit of Best Buy exiting the market, and added that he would wait to see how Comet performed under its new management. The indication from Tesco - Mr Browett's former employer - that it may pull back from some non-food categories in its stores showed that all mass merchants had found that "this market is much trickier to make money in than it first looks." Philip Dorgan, analyst at Panmure Gordon, said: "Another important seasonal trading period has been negotiated, reasonably successfully. The risk profile remains high but we think it can repay its bonds this year, helped by planned lower capital expenditure and cost savings.