'Worst Christmas ever' on the cards for high-street retailers

Gloom deepens as analysts cut profit forecasts for Dixons owner DSG in face of falling sales

Analysts have slashed forecasts for DSG International ahead of its results this week, as retailers warn of the "worst Christmas ever".

Credit Suisse cut its annual profit forecast for the electricals retailer, whose brands include Dixons and Currys, by 63.4 per cent to £33.7m, as it noted more aggressive price cuts on televisions and the withdrawal of credit insurance to electrical suppliers. Nick Bubb, an analyst at Pali International, said it was feasible DSG would end up with no profits at all this year if it was unable to arrest falling sales.

The latest profit figures for DSG, which reports interim results on Thursday, are likely to deepen the gloom in another miserable week for retailers, as home decoration supplier Topps Tiles and DIY specialist Kingfisher confirm fears of dire trading at retailers closely linked to the housing market. Also reporting this week, Clinton Cards, a bellwether of the high street, is set to provide an update on trading over the past five weeks alongside a difficult annual shareholder meeting on Tuesday. Fashion retailer French Connection will also release downbeat sales figures on Wednesday.

Michael Sharp, deputy chief executive of Debenhams, told the Drapers fashion trade conference, where a battered industry gathered to discuss its

woes last week, that there was more high-street discounting than ever, as many retailers had not anticipated the strength of the downturn.

He said: "Although we have all de-stocked, I am not sure we have done enough. We are staring in the face of probably the worst Christmas we have ever had." However, he added that Debenhams would not launch into a full sale before Boxing Day because its stock levels were under control and retailers would try to hold off from discounting as the last week could make an enormous difference between hitting or missing sales targets.

Sir Stuart Rose, chief executive of Marks & Spencer, told the same conference that M&S had lost market share in womenswear amid a definite step-down in trading across the high street in the past two weeks. He said recent promotional activity was about "making sure you are there as one of the players". M&S launched an unusual 20 per cent discount day last Thursday to coincide with a Debenhams event, which was extended to four days from three as the retailer attempted to tempt in wary shoppers.

Meanwhile, supermarket chain Morrisons launched several buy-one-get-two-free deals. Industry body IGD told its members: "This type of promo-tional mechanism is relatively new and represents an intensifying of competition in the run-up to Christmas."