Analysis
A look at DSGi’s share price today reveals that markets had more or less anticipated these results. The price is stable at around £45, but it’s worth noting that this time last year the price was more like £160 and it topped £220 in October 2006.
So this is just another stage in a long decline for the group that used to dominate UK electrical retailing. Browett blames a challenging environment and there’s no doubt that the PC market is fiercely competitive and that the current global macroeconomic climate is unfavourable.
But DSGi has itself to blame too. Its response to smaller margins has been to try to compete on price, with heavy discounting and price promotions. At the same time it has done nothing to address its reputation for a poor in-store experience.
The result has been symptomatic of a broader trend in PC retailing: it loses a large proportion of even the customers who come into the store to etail, where prices are lower and choice is better. Most independent PC retailers have either moved into the service sector or have specialised into niches like SMB or enthusiast computing.
DSGi has online and SMB targeted operations, but it’s up against specialists in each of these sectors and will always be fighting against the odds. Its strength is in retail and, with all the additional overheads associated with it, that doesn’t look like much of a strength right now.
Its turnaround plan appears to focus mainly on doing retail better, but with the economic climate making people more price conscious than ever and with Best Buy threatening to come over here and show DSGi how to do it, you have to wonder if that will be enough.
