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By | Joe Fay 15th May 2008 09:32

Dixons admits 'it's even worse than you thought'

Overhauls PC World, slashes stores and dividend

DSGI will overhaul its PCWorld computer barns and slash its fleet of High Street shops as part of a turnaround plan revealed the same day it admitted sales have gone into reverse at its computer retail business.

The dire condition of the electronics giant's business was underlined by the company's decision to halve its shareholder dividend, instantly slicing off over 8 per cent per cent of its share price this morning.

The company formerly known as Dixons also confirmed the turnaround would cost an extra £110m in capital expenditure over the next three years. It disclosed £340m in exceptional costs, including a £240m write down on its Italian operation.

DSGi's mea culpa today said what any high street shopper has known for years – the chain hasn't kept up with customer needs, and its staff are often not qualified to help them buy increasingly complex electronics products.

The group pledged to improve its ranges, customer experience and store layouts. It also said "training and incentives will be improved for all store colleagues."

A new PCWorld format has been developed, with 10 per cent of its stores likely to be refitted before next Christmas. A similar overhaul will sweep across its Currys shops.

The group will take drastic action on the high street, slashing around 77 from its 177 strong line-up as store leases expire. Whitegoods – washing machines, fridges and the like – as well as personal care products will be dumped from the high street, in favour of more laptops, TVs and other digital goodies. What this says about the personal habits of the digital generation is anyone's guess. Up to 43 stores in Italy will also be dumped.

In the medium term, the company reckons it can hit gross margins of 2 per cent to 4 per cent, with increased sales densities, better product mix and better sales of accessories and services, and the other cost savings.

In the mean time, it expects the coming year to be "very challenging".

Actually, things are already challenging. A full year trading statement which came hard on the heels of the company review, showed sales at its electricals business up 8 per cent for the year, but just 1 per cent like for like, in the 53 weeks ending May 3. In the 29 week period, total growth was 10 per cent, but down 1 per cent like for like, with the UK standing still in the period.

Things were worse at the computing arm, with year on year growth up 1 per cent, but down 6 per cent like for like. For the 29 week period, the division was down 1 per cent in total, and 10 per cent like for like, with the UK sliding 9 per cent on a like for like basis.

DSGi had already coughed to problems at its PC division due to the damp squib launch of Microsoft Vista at the turn of last year – but the latest figures show things getting worse not better as the industry adjusted to Microsoft's unloved OS.

DSGi's online business was up 8 per cent in total for the year, of 1 per cent like for like. ®

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Chris Mellor

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Frank Jennings

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