DSGi needs to be switched on to cope with ailing sales at its PC World business, or is it time to pull the plug?
The inquest is under way at DSGi after the electricals group came a cropper at Christmas.
Yesterday’s numbers from the retailer were genuinely shocking and DSGi’s shares slumped to their lowest point in more then a decade. Like-for-likes had fallen, margins took a hit and profits will fall short by about£50 million.
The big question is whether DSGi’s difficulties are reflective of trends across the stores sector or unique to itself.
The answer must be a bit of both. Retail’s problems in a harsh consumer climate are well-known and DSGi, which sells some big-ticket items – albeit subject to price deflation and on wafer-thin margins – could be expected to notice the pinch. But the consumer background is not sufficient explanation for the scale of disaster suffered by the electricals giant over the festive season.
While the core UK electricals division – the Currys.digital chain – managed at least to maintain flat comparable store sales, the real trouble was at the PC World chain, which posted a horrendous like-for-like plunge of 10 per cent.
In this age of Facebook, silver surfers and wireless technology, PC World should be roaring ahead, not reeling in confusion. No retailer could ask to be in a sexier market. So what on earth has gone wrong?
To be fair, DSGi finance boss Kevin O’Byrne resisted pat excuses yesterday. Yes, he said, the economic background had not been helpful. But he admitted that the retailer would need to take a long hard look at itself – especially as other trading statements appear that will enable comparison of performance – to work out to what extent the festive meltdown was self-inflicted.
PC World did well in some categories, such as digital photoframes and games, but they were not big enough to counterbalance low pre-Christmas demand for laptops and accessories.
The chain is attempting to reposition itself, in the words of Landsbanki analyst Paul Deacon, “from computers to computing”. Strategically, that is the right thing for PC World to do.
On yesterday’s evidence, there’s a vast distance still to travel. PC World, for so long at the cutting edge of technological innovation, does not yet seem to have understood how to connect with shoppers’ changing needs and expectations.
That will be the biggest challenge facing new DSGi chief executive John Browett. In the meantime, other retailers, such as Carphone Warehouse and even Tesco, will continue their own drives to become the one-stop shop for the digital age consumer.
No time for games
I visited Woolworths’ Wood Green branch the Saturday before Christmas, in a last-minute search for classic kids’ game Buckeroo.
The toy was not to be found, although a similar game called something like Ali Baba’s Camel was on offer.
A few feet away, a young couple were also looking for Buckeroo and were not to be placated by any lookalike version. “I don’t want Ali Baba and his f*****g camel, I want Buckeroo,” complained the bloke. “Let’s go to Toys R Us, they’re not serious about toys here.”
Let’s hope that, for Woolies’ sake, it was a vignette not repeated too many times in too many stores.