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January 16, 2007

DSGi: firing on most cylinders

DSGi, or Dixons Group as it was previously known, has performed strongly over the last decade. However, it has often been unable to report that all its divisions are simultaneously performing well. The retailer's joint interim results and Christmas trading update is no different.

By CBR Staff Writer

In a trading update, DSGi has reported strong results in all but two geographies – France and Italy.

During the early part of the decade – when DSGi had a greater focus on the UK – its Dixons fascia disappointed, but its Currys and PC World chains grew strongly. Later, in 2005, Dixons’ performance improved, but The Link then began to struggle. It seems the first half of 2006/07 has been no different at DSGi, with its UK and most European regions performing well, with the exception of UniEuro in Italy and PC City in France.

A slow economic outlook and political and economic uncertainty in Italy has led to low consumer confidence and this has fed through to like-for-like declines of 10% at UniEuro. Electricals products – particularly audio/visual products which have driven the European electricals market recently – are primarily wants driven, and therefore many consumers have deferred purchases until a later date.

DSGi is investing in marketing and store refurbishments in order to capitalize when economic and political issues are resolved. In France PC City has also underperformed, but now under the same management of the UK’s PC World, a profit and like-for-like sales improvement looks likely.

Elsewhere, DSGi has performed well. However, a difficult 2007 looks ahead for its core UK business as its like-for-like sales begin to come up against the strong comparatives of 2006. With price deflation rife, massive volume increases will be a necessity to maintain positive like-for-like growth. Trading in Scandinavia, Central Europe and in DSGi’s pan-Europe e-retail division has been strong.

DSGi remains the second largest electricals retailer in Europe and as such has a diverse range of interests across many fascias, countries and electricals sub-sectors. It is this that allows it to perform well as a whole, spreading the risk of changing consumer trends and economic downturns in certain geographies. However, this broadness inevitably means that going forward DSGi will find it a supreme challenge to get all its operations performing in line with expectations.

Source: Verdict Research

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