Sales slump affecting PC World

Sep 3 2009 by Iain Laing, The Journal

COMPUTER chain PC World is bearing the scars of a sales slump as recession-hit businesses cut back on spending, owner DSG International.

The group said PC World’s like-for-like sales tumbled 15% in the 16 weeks to August 22 with “significantly lower” sales to business customers in tough trading conditions.

DSG also struggled against tough comparisons with a year ago, when TV prices were slashed, as like-for-like sales of UK electrical goods slid 14%.

Across the group, a stronger international performance helped limit like-for-like sales declines to 6%, improving on the 9% slide seen over the previous year. Chief executive John Browett said revenues were “slightly ahead” of expectations, adding: “Given the challenging environment, this is an encouraging start.”

DSG raised £310.6m from investors earlier this year to speed up its store revamp programme in the UK. It has refitted 108 stores so far and plans to improve up to 80 more by the end of the trading year.

Mr Browett said DSG was making “good progress” as the revamped stores are continuing to outperform the rest of the the group.

Despite the sales declines, DSG said UK trading was in line with expectations in a difficult UK market, while it reported some improvement in group margins. The firm is also turning around its Italian and Scandinavian divisions, although at the time of its fundraising, it braced investors for negative like-for-like sales across the group until the second half of the 2010/11 financial year.

Shares were up as much as 7% early on, although they fell back later as analysts digested a “mixed” update.

Seymour Pierce analyst Freddie George said UK sales declines were worse than expected, although he welcomed overseas improvements.

“It is highly rated but there is huge potential to improve earnings in 2011 from the restructuring programme,” he said.