Ratings agency Moodys has put DSGi under review for a possible downgrade after the retailer suffered a first-half like-for-like tumble of 7 per cent.

The electricals group, which is to slash capital expenditure by£30 million to£160 million this year, is under review because of weakening gross margins and tough trading conditions, said Moodys Corporate Finance lead analyst Yasmin Serghini.

The review will focus on DSGi’s Christmas trading and how it controls costs to “mitigate the negative effects of a reduction in customer spending”.

At a trading update last week, DSGi chief executive John Browett warned that the group was “preparing for a poor Christmas”.

He added, however, that “it doesn’t feel like a global slump of epic proportions. There are still people out there who are ready to shop”. Earlier this month, police closed part of the M6 after shoppers flocked to the new Currys megastore in Birmingham.

But Browett conceded that trade has weakened in recent weeks as a result of falling consumer confidence.

He said planned capex cutbacks would not affect DSGi’s renewal and transformation plan, which is ahead of schedule. By peak Christmas trading, DSGi will have refitted 40 PC World stores – 10 ahead of target.

It will have revamped seven Currys stores and four Currys.digital shops. The retailer will achieve its£30 million reduction by postponing IT projects and store openings and scaling back refurbishments.

Moodys feared that there was a risk that DSGi’s full-year profit would “trend below Moodys previously indicated guidance of£130 million”.

In the 24 weeks to October 18, like-for-like sales at the PC World division fell 11 per cent. Its Currys fascia reported a 7 per cent decline.

Pali International analyst Nick Bubb said that, despite management’s best efforts to improve the group, “profits are still falling, implying that the consumer downturn is getting the upper hand”.