Profits at PC World and Currys owner DSGi slumped 78 per cent in the year to May 2.
The electricals retailer revealed today that underlying pre-tax profits, excluding the disposals of its operations in Europe and Scandinavia, were £50.5m versus £225.6m the year before. After one-off charges of £190.9m, the group made a pre-tax loss of £140.4m.
Total underlying group sales dropped 1 per cent to £8.2bn during the year. Like-for-like sales slumped 9 per cent.
Underlying retail profit slumped 57 per cent to £95.5m from £219.9m the year before. E-commerce profits doubled to £15m.
Underlying gross margins increased 0.2 per cent in the second half, down 0.1 per cent in the full year.
Chief executive John Browett said: “The difficult economic backdrop across Europe and subsequent impact on consumer spending, particularly on discretionary products, has been well publicised. The group expects these conditions to continue through the coming year in many of its markets.”
Browett said that the group was well prepared for the environment and will focus on managing costs, margins, stock turn and cash flows while revamping its stores as part of his “renewal and transformation” plan.
DSGi reduced costs by £95m in the year and has outlined £200m of cost savings over the next four years. It will reduce working capital by £80m to £130m.
The group, which staged a £311m rights issue and renegotiated its £475m banking facilities last month, said that the group had net debt of £477.5m as of the year-end.
Store overhauls reap rewards
A key part of Browett’s strategy has been the overhauling of the group’s store formats in the UK and the Nordic regions. The result has been a gross profit uplift of between 11 and 65 per cent in reformatted stores, versus the rest of the chain.
The retailer had overhauled 63 stores at the year end in the UK and in the Nordics – where it operates its Elkjøp fascia. A further 19 stores in the UK have been reformatted to date, including its Currys Megastore in Birmingham.
The retailer will open 101 reformatted stores in the UK during the year, including four Megastores.
DSGi’s UK and Ireland division reported an 11 per cent fall in total sales in the year to £4.2bn, a like-for-like drop of 11 per cent.
Sales fall at Currys and PC World
Sales at the electricals division, which includes Currys, fell 9 per cent to £2.7bn, a like-for-like slump of 10 per cent. It cut the prices of its TVs in July last year to bring them in line with the internet and slashed stock levels, impacting margins. It said that white goods have been hit by the slowdown, but haveshown stability in the latter part of the year. Netbooks and laptops showed strong volume growth in the second half.
In its computing division, which comprises PC World and the Tech Guys, total sales dropped 14 per cent to £1.6bn, with like-for-likes down 13 per cent. Underlying operating profit was £41m. The group said that careful margin and stock management limited the impact of the weaker sales environment on profits.
DSGi’s performance mirrors the challenging trends seen by rival Kesa, following its announcement yesterday that it had notched up a full-year loss of £81.8m. Kesa said it was budgeting for a fall of 5 or 6 per cent on a like-for-like basis in the current year.