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DSGi: Down, but not out

by Ben Furfie
Thursday, July 10th 2008 at 11:10AM

DSGi: Down, but not out DSGI is remaining bullish in the face of a crippling 30 per cent drop in profits, record share price lows and the mammoth threat presented by US retail giant Best Buy as it prepares to dramatically shake up the European sector with its new-found ally Carphone Warehouse.

While admitting the changing climate has taken its toll, DSGi is insistent it is taking serious measures to turn the business around with the implementation of CEO John Browett's 'five point plan.'

"The results were in line with expectations but it has been a difficult year. However, we hold market-leading positions with strong brands in several markets, especially the UK," said Mark Webb, spokesperson for DSGi. "It's only six weeks since we announced the new strategy to restore profitability and competitiveness. It is well underway but it will take time to impact performance. Already the new format store trial (at PC World Enfield) is complete and a roll-out has begun with three more stores operational and a further 13 to emerge within three months."

But for many DSGi staff the results of this turnaround will quite simply mean redundancy. When asked about the rumours that up to a third of the retailer's staff would be culled, Webb said: "We announced we would identify £50 million in savings to remove from the business' central costs, to reinvest in our customers. Inevitably there will be some roles redundant in the new structure, but we are in consultation with those staff involved, so cannot confirm any figures at this stage."

However some industry commentators are claiming that even large-scale redundancies won't be a dramatic enough manoeuvre – and that nothing but a complete overhaul of the business model will save it.

"The retail model that DSGi – and probably most technology retailers – follow today is outdated, it's not as effective as it could be, and it's inefficient," said senior analyst at Canalys Alastair Edwards. "The nature of technology retailing is moving from shifting boxes at very low margins and that's why the online market has increased in size and strength so rapidly. It puts huge pressure on the established old school retail channel model, which is all about having expensive retail property with – I'm guessing – not as optimal returns per square foot. It's an outdated model."

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Tags: Analysts, DSGi, Financials

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