Dixons' Greek Unit Shows How to Prosper During Financial Crisis

(Bloomberg) -- Andreas Athanassopoulos says his company is doing its bit for the Greek economy.

The chief executive officer of Kotsovolos, the Greek unit of the U.K. retailer of electrical and telecommunications equipment Dixons Carphone Plc, has helped turn the company around by investing in the business and not just cutting costs, he said in an interview in Athens.

“To reverse the company’s financial results, we had to either shrink all operations to make them smaller and hopefully more profitable or to try and grow the underlying numbers by gaining from economies of scale and economies of scope,” he said.

The company chose to do the latter and the bet has paid off. For the financial year ending in April, the unit expects to report a profit of 13 million euros ($16 million), reversing a loss of 5.2 million euros in 2013, when Athanassopoulos took over as CEO. The turnaround has helped make the Greek unit the London-based group’s best performer, with the biggest revenue growth.

Companies like Kotsovolos are finding out that with the right strategy there are gains to make in Greece even though the country’s economy has cratered, with the national output shrinking 26 percent since 2008 and the retail sector contracting by 54 percent. Kotsovolos has been able to do that by investing in products and services that are tailored to a market that is more cost-conscious, the executive said.

Cost-Conscious Customers

The company has sought “to utilize our footprint and sell more products but also more services across all product categories,” Athanassopoulos said.

It has also used technology to enhance customers’ “cost-reducing capability in terms of electricity, water and other cost-related factors,” he said. “Our ability to prolong family assets by extending supplier warranties was also a key driver in these achievements.”

The strategy stemmed from necessity in a market that has had to contend with “the constant regression of consumer sentiment and the constant reduction of disposable income of customers,” Athanassopoulos said. Since the beginning of Greece’s recession in 2008, the disposable income of households has fallen 33 percent.

Investments

Kotsovolos quadrupled its investments between 2013 and April 2017. Over the current financial year, it may have implemented an additional 4 million-euro investment plan.

While the unit reduced the number of stores by five to 94, the number of employees was increased to more than 2,100 in mid-2017 from 1,700 three years earlier. Money was invested in renewing existing stores or moving to bigger, more efficient ones.

According to Athanassopoulos, investments like the ones made by his company will be key to a sustained recovery in Greece, which was the epicenter of Europe’s financial crisis nearly a decade ago. For the economy to revive, it will take “a generous and stable investment wave from within and from outside the country,” he said. “Such investment could increase the competitiveness of the country and also push forward the generation of wealth.”

The nearly 10 years of crisis in the country “must be a warning and not play a reassuring role in how to move forward from here,” Athanassopoulos said, adding that the country “must present a comprehensive and viable plan as it moves toward the post-memorandum economic era.” Greece is heading toward the completion of its third bailout program, which ends in August.

What’s next

Kotsovolos’s strategy made Dixons Carphone’s Greek unit a winner for the group. At the end of the fiscal third quarter, the unit’s revenues were up 23 percent, almost three times the 8 percent gains for the group in the Nordics and compared with 1 percent growth in Ireland and in Dixons’s home market.

For Athanassopoulos, the growth while strong is, “not sufficient for the future.”

He is now exploring newer ways to invest in Greece. His focus: to improve “our capabilities in the areas of house-automation, customer service, service-warranty response times and more generally our ability to be closer to customers and their needs before and after product purchases.”

To contact the reporter on this story: Sotiris Nikas in Athens at snikas@bloomberg.net.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Paul Tugwell

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