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Friday, 14 February, 2003, 12:10 GMT
Dixons hits back at warranty critics
Dixons store front
Dixons relies on warranties for much of its profits
High Street stalwart Dixons has hit back at consumer watchdogs who claim its extended warranties are a "waste of money".

Dixons, the UK's largest electrical goods retailer, has attacked as "outdated and inappropriate" Consumers' Association reservations over warranties and other after-sales products.

Many children have their own TV, video recorder... Small wonder that claim rates increase

John Clare, chief executive, Dixons
Campaigners have complained that the warranties, while a big contributor to Dixons profits, offered poor value - often duplicating manufacturers' guarantees.

But Dixons chief executive John Clare, said the Consumers' Association harboured "quite serious misunderstanding" over the market.

Little hands...

Mr Clare questioned association claims that modern electrical goods were more reliable, making warranties less worthwhile.

"The principal factor in products not functioning properly is... the method of intensity and use," he wrote in a letter to association chief executive Dame Sheila McKechnie.

"Thirty years ago few children were allowed to touch the buttons on the TV.

"Today many have their own TV, video recorder, hi-fi, games console... Small wonder that claim rates increase in absolute terms each year."

Half of television owners who take out a five-year warranty make a claim, with washer/drier customers making almost two claims on average, Mr Clare said.

The association, saying it stood by its comments, said it would respond to Mr Clare's letter next week.

Shares fall

The follows the start of a Competition Commission probe into the warranty market, worth 800m a year in Britain.

And it comes amid a difficult time for Dixons. On Thursday, its shares fell to 93.25p - their lowest level in more than seven years.

The fall followed a Bank of England report which warned over the outlook for consumer spending, and continued a decline in the firm's share price since November, when the stock topped 190p.

The firm warned last month that profits would be flat this year, after weak Christmas trade.

Dixons stock stood 4p higher at 97.25p in midday trade on Friday.

See also:

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