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DSGi issues another profit warning - PC Retail

DSGi issues another profit warning

Blames expected 32 per cent profit drop on 'challenging' trading environment, promotion-led shoppers and weak UK PC sales
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The UK's largest electronics retailer DSGi has, for the second time this year, warned that it expects a drop of up to 32 per cent in annual profits on the back of 'challenging' trading conditions and increasingly promotion-led sales.

The retail group said that it was expecting full year profit before tax to be in the region of £200 million to £210 million, a drop of up to 32 per cent on 2007's figures when it made £295.1 million and much lower than analyst's expectations.

During the 25-week period up to April 5th 2008 the group saw sales increase by six per cent, however, like-for-like sales were down by one per cent. The company added that sales trends remained in line with what the company had previously reported on January 3rd.

Much of the increase in sales during the period was put down to increased promotion activity, with those focusing on laptops and flat panel televisions driving sales in particular. However, this increase in promotions had an impact of 0.8 per cent on the group's gross margin.

It added that outside of these promotions, sales had been lower than expected and that had resulted in a negative impact on its margins.

The group said that computing sales had remained disappointing despite "reasonable demand for laptops and games consoles." It added that sales of stand-alone non-hardware products were lower than expected, but were largely in line with trends it had previously reported.

Speaking about the announcement, group chief executive John Browett said: "The trading environment since we last reported has remained challenging across our markets, particularly in the UK, Italy and Spain.

"Whilst like for like sales patterns are broadly in line with those we reported over the Christmas period, it is clear that customers have become increasingly promotion and deal driven, impacting gross margins," he added.

"Going forward it is important that we increase our focus on delivering the value, choice and service that our customers demand, particularly in the prevailing difficult economic environment."

Browett also announced that he would be making the first phase of findings from his business review public on May 15th. "I will present the first phase of the business review I have carried out since joining DSGi on 15 May 2008."

Shares in the retail group plunged 9.6 per cent – 6.25 pence a share – on news of the profit shortfall to 58.75 pence a share. The group's share price has fallen a total of 37 per cent this year. It was demoted from the FTSE 100 in December 2007.

However, it wasn't all bad news for the group with it reporting strong growth to its ecommerce stores including dixons.co.uk and pixmania.com.

Shares information courtesy of Bloomberg.

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