DSGi trumpets its cost savings amid retail gloom

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The Independent Online

DSGi unveiled dire trading at its Currys and PC World stores in the UK yesterday, and revealed that it does not expect trading conditions to improve until 2010.

However, the pan-European electricals group surprised the market by unveiling a further £25m of savings this year, inaddition to the £50m it has already delivered. Yesterday its shares rose 4.25p to 57p.

DSGi's chief executive John Browett said: "Laptops continue to perform relatively well, but all categories are being affected by lower footfall across retail. We are not expecting a quick recovery."

For the 16 weeks ended 23 August, DSGi's UK computing division, which includes its PC World stores, posted like-for-like sales down 12 per cent. Mr Browett partly blamed the dire figures on being up against tough comparables for the same period last year, when an overstock of laptops led to heavy discounting. He added: "We are seeing an improvement in our gross margin."

Like-for-like sales at DSGi's UK & Ireland electricals division, which includes its biggest UK chain, Currys.digital, fell 7 per cent for the 16-week period. Mr Browett said there was still demand for flat-screen TVs and laptops, but sales of white goods, such as fridges, were being hit by the housing market slowdown. DSGi is to roll out 10 of its new format out-of-town Currys stores and high street Currys.digital stores, as well as a new format Currys hypermarket near Birmingham before Christmas.

However, DSGi will employ fewer temporary staff in its stores in the run-up to Christmas, in an effort to cut costs. Pali International analyst Nick Bubb said the internal improvements, such as the new format stores and cost savings, would be "swamped" by the wider economic external factors: "It will definitely get worse before it gets better. They are trying to run up a down escalator." City analysts predict pre-tax profits of £130m in 2009.

Total group like-for-like sales at DSGi fell 7 per cent. Group gross margins were down 0.75 per cent, partly because of heavy discounting. Sir John Collins, chairman of DSGi, is to retire from the board at the group's AGM in 2009.