dixons electrical

New formats could help Dixons Electrical owner DSG ride out the storm.

Dixons Electrical, Currys and PC World owner the DSG group has been advising investment analysts about performance of its refitted stores.

Results are not so good at Currys, however PC World is looking better, stated Teathers.

DSG’s new look stores have seen an increase in sales, but the stockbroker warned that ‘maintaining similar uplifts across the chain will be difficult and is unlikely.’

However the success of the new stores plus further plans could be enough to ‘persuade investors to back a rights issue and potentially also avoid asset sales at distressed prices.’ Teathers suggested

Teathers believes that DGS with its large debts remains in danger of breaching its loan contracts and they would not be surprised if DSG’s management were not already in talks with its lenders to revise its banking facilities.

The broker suggested that DSG’s management are expecting a deep recession, with prospects of a recovery not appearing until late 2010.

Teathers analyst Paul Deacon explained ‘Even assuming management can negotiate its way through the downturn, we believe the growth of the web channel will continue to undermine the economics of the stores, ultimately revealing substantial excess capacity against inflexible lease liabilities’

A delay by US electrical retailer Best Buy of its entry into the UK market is good news for the DSG group. DSG’s management seems to be making strides in its efforts to turn around its loss-making Italian and Spanish retail outlets.
Dixons Electrical has been further boosted by Empire Direct, a low cost electrical retailer, going into administration. Empire Direct had a turnover of £120 mil per year and with its efforts to open stores had been making inroads to Dixons Electricals business.