DSG profit falls 30 percent, cautious on outlook

Electrical goods retailer DSG International met lowered forecasts with a 30 percent drop in annual profit on Thursday and said it remained "very cautious" about consumer confidence in many of its markets.
DSG, whose store chains include Currys and PC World in Britain, UniEuro in Italy and Elkjop in Nordic countries, said profit before tax and one-off items was 205.3 million pounds ($405.2 million) in the 53 weeks to May 3, held back by weak sales of computers and its Italian operations.
The firm said in May that underlying profits were likely to be between 200 million and 210 million pounds, following two profit warnings earlier in the year.
At that point, new Chief Executive John Browett laid out a recovery plan which included halving the final dividend, cutting costs and investing in customer service and the Internet. But that has not stopped DSG shares from continuing to slide amid concerns that Europe's shoppers are cutting back on spending due to rising fuel, food and mortgage costs.
Browett declined to comment on current trading in a conference call with reporters, but said its markets would be "very tough, and it's going to be a challenging year." Smaller rival Kesa warned on Tuesday that trading conditions were getting worse.
DSG shares have slumped around three quarters in value over the past year, underperforming the DJ Stoxx European retail index by about 65 percent. News last month that US electricals group Best Buy is planning to open stores in Europe next year has added to the pressure.
"DSG may not be doomed, but trading conditions are worsening and it has less than twelve months to get its act together in terms of customer service and range authority, before mighty Best Buy launches their UK assault," said Pali International analyst Nick Bubb, keeping a "sell" rating on DSG shares. At 0829 GMT, the shares were down 1.1 percent at 44.5 pence, having swung within a range of 43 to 48 pence.
Including restructuring and business impairment charges of 389.2 million pounds, DSG made a loss before tax of 192.8 million pounds. It said that, as at May 3, it had 779 million pounds of available funding headroom.
Sales rose 8 percent to 8.55 billion pounds and were up 1 percent on a like-for-like basis. However, same-store sales were down 6 percent in computing and down 11 percent in Italy.
Browett said his turnaround plan was making good progress and that three new format PC World stores were performing well, with a further 13 due to be rolled out in the next three months.