DSG to close 77 Currys outlets and slash dividend

John Browett, the new chief executive of DSG International, is to slash the company's dividend, close underperforming stores and try to improve customer service as he attempts to transform the fortunes of the Currys and PC World-owner.

Mr Browett, headhunted from Tesco last autumn, claimed yesterday that the conclusions of the business review he has conducted at DSG would "transform the very DNA of our business over the next three years".

Analysts said he faced an uphill battle. DSG has issued two profit warnings this year as consumer spending on electricals has slowed, and faces an increasing threat from online competitors, which Mr Browett expects to triple their market share to 30 per cent within three years.

DSG also faces intense competition from Best Buy, the giant American business, which plans a joint venture in the UK with Carphone Warehouse to launch electrical superstores.

Nick Bubb, a retail analyst at Pali International, praised Mr Browett's "energy and enthusiasm" but thought that his plans were doomed to failure. "Given the economic background, things will get worse for the group before they get better – profits will fall sharply this year," he said. "The housing market and consumer slump are likely to swamp the efforts of the new management team to turn things around."

Mr Browett's strategy includes the closure of 77 of the 177 Currys.digital stores, the former Dixons outlets that trade in high street locations, as their leases expire over the next five to six years. DSG also plans to revamp stores across the PC World, Currys and Currys.digital brands, and is trialling new larger stores.

Smaller shops will no longer sell white goods or personal care products, with the space reallocated to more comprehensive ranges of laptops, televisions and other digital products. Staff are to be given more training on advising customers, and DSG plans to step up its online operations.

Mr Browett said DSG would retain its troubled Italian retail business, but plans a strategic review of other operations, including units in central Europe and Spain. Cutbacks in the head office are expected to save £50m this year, with further cash freed up by a halving of the dividend paid to shareholders in the current financial year. Next year's dividend is likely to be only marginally more generous.

The new chief executive admitted that the announcement that Best Buy, previously thought to be considering a bid for DSG, would enter the UK market in 2009 with Carphone had "galvanised" his plans. Mr Browett is also concerned about competition from Sainsbury's, which is to increase its efforts to sell electricals through its online business.

Paul Deacon, a retail analyst at Landsbanki, said: "Our initial reading of this is that it is unlikely to impress the market – store closures in Italy have already been announced, and the only other closures are 77 small high street stores."

Insiders at DSG insisted they had expected a lacklustre response from analysts focused on figures rather than the change of culture that Mr Browett claims he will achieve at the company. "It is up to us to deliver now and the proof will be in the pudding," one said.

DSG has around 700 retail outlets in the UK. It revealed yesterday that total sales over the 2007-08 financial year had risen by just 1 per cent on a like-for-like basis, with a 6 per cent slump in sales at its computing business. Trading deteriorated across almost every area of the business during the second half of the year.

However, Mr Browett pointed to the success of DSG's online business, which remains the biggest electrical retailer on the internet in the UK and which has posted a 27 per cent increase in sales over the past year. He also conceded that the company had not "kept pace with its core customer needs", a thinly veiled criticism of John Clare, the former DSG chief executive, who retired last year.

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