Dixons Carphone has decided to close permanently all of its outlets in airports, blaming the UK government’s decision to scrap tax-free shopping.
The retailer said it did not expect a sufficient recovery in passenger numbers to make up for the loss of the retail scheme from 1 January, which enabled non-EU visitors to reclaim VAT paid on their purchases.
Almost all of the 35 Dixons Travel shops are shut because Covid-19 restrictions on international travel have greatly reduced the number of people allowed to fly to and from the UK.
Although the business has historically contributed £20m in annual profit to the group, Dixons Carphone said it had made the “difficult decision” not to reopen the stores, which are situated in UK airports from Aberdeen to Southend, and in Ireland and Norway, as well as on two P&O cruise ships. All staff from the stores will be offered roles elsewhere.
In contrast, WH Smith said it was issuing bonds to raise £325m to refinance more than £250m of existing debts and fund the opening of 100 new stores in travel locations over the next three years. The books to paperclips chain said the majority of the new stores would be in the US, as it revealed that the travel division had fallen to a £28m loss in the six months to February from a £49m profit a year before as sales slumped 65%.
It said sales in UK airports and stations had been hard hit by lockdown restrictions. The group made a £4m half year loss, down from a £93m profit as its high street stores also saw falling sales and profits.
The move by the Treasury to end tax-free shopping after December 2020 caused a commotion in the retail sector, and the bosses of large airports such as Heathrow, Gatwick and Birmingham, as well as the heads of big retailers, wrote a letter to the chancellor, urging him to reconsider because it would put 70,000 jobs at risk.
The Treasury said the decision brought personal duty and tax systems in line with international norms. However, it leaves Britain as the only country in Europe that does not have a tax-free shopping scheme for international visitors.
Dixons Carphone, which owns the Currys PC World brand, reported strong trading for electrical products since January despite the closure of its stores in the UK and Ireland for most of the period and further trading restrictions in the Nordic region.
It follows on from the group’s bumper Christmas, when locked-down European consumers splashed out on big-screen TVs, food preparation gadgets and health and beauty appliances.
As a result, Dixons Carphone said it had repaid all £73m received in furlough assistance to the UK government. After the cost of repaying support, the firm has forecast a full-year profit before tax of about £151m, in line with analysts’ expectations.