Web competition – and its impact on prices in particular – will be taxing Browett as he works out how to whip DSGi into shape ahead of his strategy announcement on May 15.
Last week’s profit warning – its second in four months – highlighted the scale of Browett’s challenge. He said shoppers had become more bargain-focused, denting gross margins, which, combined with a group like-for-like fall, would bring expected profits down 14 per cent to about£200 million.
Gruelling trading conditions can be blamed in part for DSGi’s fix but consumers’ shift to online has exacerbated and made permanent expectations of ever-better deals.
Enhanced value, choice and service are to be focuses for improvement, Browett said. It sounds eminently sensible, but the seismic changes in electricals retailing and DSGi’s specific local difficulties will bring hard choices.
First of all, despite its brave decision a few years back to shut the Dixons chain, DSGi looks over-shopped as consumers migrate online. It’s hard to imagine the business having nearly as many UK stores in a few years’ time unless dramatic new ways of using the shops are found.
Second, DSGi’s internationalisation, the logic of which few would question, has brought difficulties as well as successes. While the Nordic arm has performed, Italy has not. The prospect of disposals must be real.
A dividend cut is widely expected by the City, along with potential write-downs and perhaps even a bid for, followed by break up, of the business.
Browett has a big task on his hands and some daring thinking will be needed. His chances can’t be written off but it’s telling that his predecessor, industry veteran John Clare, is launching an e-tail business this summer.
JD’s in with a sporting chance
Fashion sales were their worst for eight years in March and down for the sixth consecutive month. But JD Sports has been spectacularly bucking the trend.
JD’s young customer base provides it with some protection. But smart buying, merchandising and differentiation have been vital. Things might get tougher, but JD seems in a good position to ride out the turbulence.
George MacDonald is deputy editor of Retail Week