Ratings agency Moodys has placed electricals retail giant DSGi under review for a possible downgrade following last week’s trading update.

Weakening gross margins and challenging trading conditions were cited as reasons for the review by Moodys Corporate Finance lead analyst Yasmin Serghini.

At present, DSGi has a Ba1 rating, but the agency said there was a risk that full-year profit “would trend below Moodys’ previously indicated guidance of£130 million”.

Serghini warned: “This would result in weaker credit metrics, with a leverage ratio moving above five times, a level that Moodys would not view as commensurate with a Ba1 rating category.”

The review will focus on DSGi’s trading over Christmas and “its ability to successfully control costs across the group to mitigate the negative effects of a reduction in customer spending".

Last week DSGi posted like-for-like sales declines of 7 and 11 per cent at its core UK electricals and computing businesses respectively in the 24 weeks to October 18.