Currys feeling the heat as sales slump

Published on Thursday 23 October 2008 10:01

CURRYS and PC World owner DSG International today said deteriorating consumer confidence has hit sales at its stores across Europe.

The firm said total like-for-like sales in the six months to October 18 fell by seven per cent.

Its UK computing arm, which includes PC World, was worst hit, with like-for-like sales tumbling by 11 per cent. The UK electricals division, including Currys, was down seven per cent.

In light of the tough economic conditions, the company said it is to cut capital expenditure by around 30 million.

Chief executive John Browett said: "The trading environment continues to be tough. We are very focused on managing through this by reducing costs and improving our cash position.

"Alongside this we are progressing our renewal and transformation programme as it is delivering for customers and generating returns ahead of initial targets."

The company has suffered from customers scaling back spending on "big ticket" items like TV's, fridges and computers.

The gloomy update from DSG comes on the day that new research forecasts that retailers are set to face their worst Christmas in more than a decade.

Non-food spending is forecast to fall in the run up to the Christmas shopping season.

Verdict Research predicts that overall spending will rise by only two per cent – the second lowest growth rate in 20 years – as consumers scale back spending.

Neil Saunders, consulting director at Verdict, said: "The consumer has been on a spending binge, with growth outstripping the growth in income by some margin. That was not sustainable."

Stripping out the impact of inflation, volume growth in the sector will be only 1.3 per cent – less than half of the 2.8 per cent achieved last year.

However, the poor performance on the high street is likely to be partly compensated by strong internet sales, with online sales forecast to grow by 40 per cent to 7 billion.

Maureen Hinton, lead analyst at Verdict, said retailers will have to "fight much harder for a share of their Christmas spending". She added: "Faced with a more expensive Christmas feast, consumers will be selective and careful."

In total, Verdict predicts that UK shoppers will spend 82.3bn with retailers in the final three months of the year, which is equivalent to 1363 per head.

DSG's update will not help improve confidence in the sector.

Yesterday, the owner of Homebase, Home Retail Group, slashed 542m from the value of the struggling DIY chain and also warned of the impact of recent financial events on profits.

Earlier this month, Marks & Spencer reported its worst results for three years as like-for-like sales fell by over six per cent.