Retailers plunged into gloom by scale of global slowdown in consumer spending
Dire sales figures from Currys and B&Q follow collapse of Woolworths
Friday 28 November 2008
The owner of the do-it-yourself chain B&Q and the electricals chain Currys piled further gloom on the retail sector yesterday as it recorded its first half-year loss in two decades and became the latest retailer to scrap its dividend.
DSGi said it wanted to preserve cash given the "recessionary environment". The pan-European group reported dire sales at Currys and PC World for the 24 weeks to 18 October amid "tough and volatile" trading conditions.
Kingfisher, which runs B&Q and the British outlets of the trade outfit Screwfix, said it would close its fledgling British Trade Depot chain and warned of plummeting underlying sales here and in China. It is the latest bad news for the retail sector, which saw Woolworths and MFI, the furniture chain, collapse into administration on Wednesday. Retailers are facing arguably the worst Christmas trading period in 30 years.
John Browett, the chief executive of DSGi, said the company was not planning to purchase Woolworths stores and there was "very little overlap" between the two retailers' product ranges. His forecast for Christmas on the British high street was downbeat.
"It is going to be very tough. Trading into that is going to be very volatile and we are going to see a lot of panicky actions on the high streets in terms of people being very worried."
He predicted more consumers would shift their spending to the post-Christmas sales, as had been the pattern during previous recessions. "We are expecting to see a pretty ropey Christmas but for us it is the two weeks after Christmas that are critical."
DSGi said that given the recessionary conditions, the outlook for peak trading and 2009 was "uncertain".
"We are prioritising cash generation as well as tightly managing stock, money margins and costs," Mr Browett said.
For the 24 weeks to 18 October, DSGi posted an underlying pre-tax loss of £29.8m compared with a profit for the same period last year of £52.4m.
DSGi's Britain and Ireland electricals division, which includes the out-of-town Currys stores and the high street Currys.digital stores, posted underlying sales were down 7 per cent for the 24-week period.
The company's British computing division, which includes PC World, said like-for-like sales had dropped 11 per cent over the same period.
Mr Browett said that the company's sales were being hit "across Europe". Hungary and Spain were the two worst performers with underlying sales down about 25 per cent.
On a brighter note, sales at DSGi's new format stores were exceeding the 15 per cent sales uplift target, compared to the performance of existing stores. DSGi has rolled out new format stores to 40 PC World, seven Currys and four Currys.digital stores.
Mr Browett said that the decision by credit insurers to scale back the insurance cover provided to DSGi's suppliers had not, so far, had any impact on its ability to get stock to the shelves.
At the half-year, DSGi had net debt of £149.5m, compared to cash of £101.3m at the same time last year.
For the 13 weeks ended 1 November, Kingfisher's group retail sales flatlined at £2.6bn and its retail profit fell 4 per cent to £176m, but this was ahead of expectations.
Ian Cheshire, the group chief executive of Kingfisher, said it had taken the decision to close its nine Trade Depot outlets in Britain to enable the company to achieve "higher and faster returns" from trade sales at its flagship B&Q chain and Screwfix, its trade-tool chain that boasts 130 stores.
In Britain, B&Q's total sales declined by 7.8 per cent to £887m and like-for-likes fell by 8.7 per cent.
Given the collapse of MFI and the troubles at other do-it-yourself chains, Mr Cheshire expected there to be an additional 5 per cent of capacity in the home improvement market over the next 12 months.
Mr Cheshire said: "We are very sad for those guys, but we have been predicting the failure of MFI for some time."
B&Q planned to recruit MFI staff, such as key show room sales staff, but it had no plans to acquire the furniture retailer's stores.
In China, Kingfisher revealed it had suffered an £18m loss and that underlying sales had dropped 32.2 per cent over the 13 weeks to 1 November as sales of new apartments nosedived.
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