Things are certainly looking bleak at the group formerly known as Dixons. It has experienced a nose-diving share price and declining sales in its PC World and Currys.digital stores of late, as punters begin to think twice before blowing their increasingly insecure cash on new computers, hi-fis and fridges.
DSG is still the UK’s market leader in electronics retail, but the recent climate has caused some unsettling shorting in its circuitry. First there were two profit warnings this year. Now rival Carphone Warehouse has announced £1.1bn tie-up with Best Buy. The American firm is the world's largest consumer electronics retailer, with 150,000 staff, annual sales of more than £20bn and a 20% US market share. Through the Carphone Warehouse deal it will acquire a half-share in DSG’s rival, and it plans to introduce its giant electronic outlets (typically around 40,000 sq ft, the size of a large UK supermarket) to these shores in 2009. All of which is ominous for DSG, which may soon find itself in the retail equivalent of slinging little stones at Best Buy’s superstore Goliath.
New chief exec John Browett has announced plans to focus on improving service to shore up sales, saying the group would soon become ‘unrecognisable’ over the next three years. If by that he means his stores will no longer be staffed by monosyllabic yoofs showing off the ‘wicked’ selections of flatscreen TVs and, er, kettles, then all’s the better.
For now it’s overhaul time at the group: a shakeup of its head office and supply chain will cut costs by £50m; it also plans to cut its dividend – shareholders will receive a dividend of 4.44p a share for the current financial year, down from 8.87p a share. Meanwhile it expects to close as many as 77 Currys.digital stores, from the 177 currently operating in the chain, as their leases expire in the next few years, and as many as 400 staff are expected to leave the company. But with Best Buy making its way across the ocean, DSG’s David may well need a few heftier rocks in its sling.