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Tue, 11 Nov 2008 Dixons UK refused credit insurance

Credit insurer ditches UK electronics stores

Daniel Goldberg, PC Advisor

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Credit insurance firm Atradius has stopped covering risk on stock sold to consumer electronics retail giant Dixons plc. The UK retail group is now scrambling to secure alternative trading terms with several large electronics suppliers, among them Samsung.

The decision comes just weeks after Dixons reported a sales slump of 7 percent for the first six months of the year. Atradius pulled back from the group as part of a wide-ranging review of UK retail, which also saw high street giant Woolworths and JJB Sports taken off its books.

The withdrawal means vendors that insure through Atradius, among them Korean giant Samsung, have no guarantees that outstanding debt with the retailer will be met. In order to avoid being left without stock during the run up to Christmas, Dixons is now understood to be scrambling to secure alternative trading terms with suppliers affected by the decision.

A spokesman for the Dixons group said Atradius had "reduced" its credit insurance with the group, but claimed it was an industry-wide issue.

"Atradius is only one provider of credit insurance in the market. Whilst it is true Atradius have reduced, but not withdrawn, credit insurance across the retail sector, this is not a DSG-specific issue. This is more about Atradius and how it manages its business. Our suppliers still have access to credit insurance, they continue to supply us and there have been no changes to our terms with suppliers," said the spokesman.

A spokeswoman for El-giganten, a Dixons group subsidiary in Scandinavia, confirmed that the company was currently in discussion with suppliers. In some cases the company has taken to paying for stock up-front. She added that the situation would be resolved "without any noticeable effect on our stores".

Atradius declined to comment on any specific cases, but did confirm that it had recently reviewed its exposure in electronics retail and that "some" companies were no longer covered.

"Times in general are tougher today. Home electronics is just the type of product that gets hit hard and quickly by the financial slowdown. We are reviewing our exposure in the sector, pulling back in some cases and withdrawing credit in other. But that doesn't mean we're moving away from the sector," said Magnus Lindgren, managing director of Atradius Sweden.

Atradius is one of the world's top-three credit insurers. Its main competitors, Coface and Euler Hermes, both declined to comment on their trading relationship with the Dixons group.

Like other electronics retailers, Dixons is feeling the squeeze of the global financial downturn. Two weeks ago, the group reported a profits slump of 7 percent for the first six months of the year and warned of further tough times ahead. The group has lost 80 percent of its stock value during the past twelve months.

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Comments received


Syd Barret said on Tue, 11 Nov 2008

Looks like the typical insurance company practice - they'll lend you an umbrella for 20-odd years but take it away as soon as it rains.

Russ said on Tue, 11 Nov 2008

I think you meant 'they lend you an umbrella when the sun's shining and ask for it back when it starts raining' And the joke is about banks. Apart from that not a bad response! ;)

Mark said on Tue, 11 Nov 2008

There was a rumour at the start of this year that a well-known retailer was on the verge of going under following a tricky Xmas 2007 period.

One imagines that Atradius and the other credit insurers can see something in the UK economy that makes them kind of twitchy and people like DSG or Comet, whose stock commitments at this time of year are enormous given the high price tags of many items, are always going to bear the brunt.

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