DSG and Kingfisher underline severity of economic slowdown

Two of Britain's most high profile retailers DSG and Kingfisher on Thursday underlined the severity of the economic slowdown with downbeat results and gloomy outlooks, while Woolworths collapsed into administration.

Retailers are struggling with a brutal downturn in consumer spending amid sliding house prices, rising unemployment and fears the country has already entered recession.

DSG, Europe's second-largest electrical goods retailer, swung to its first interim loss for at least 25 years and axed its dividend.

"Given the current economic conditions, the outlook is uncertain for peak trading and 2009. The group has set the business conservatively to preserve cash and earnings," it said.

DSG, whose store chains include Currys and PC World in Britain, Elkjop in the Nordic region and UniEuro in Italy, posted an underlying loss before tax of €29.8 million for the 24 weeks to October 18.

This compares to analysts' forecasts of a loss of £25 million to £35 million and a profit before tax of £52.4 million for the same period last year.

Shares in DSG, which operates 1,200 shops and online stores in 28 countries, have slumped 88 per cent over the past year, hit by the sharp fall in demand for big ticket items, worries over US rival Best Buy's entry into Europe next year and concerns over the withdrawal of credit insurance for suppliers.

The small rise reflected DSG's reassurance on its financial position.

It ended the first-half with net debt of £149.5 million but said it was compliant with the financial covenants of its banking facilities, with £300 million undrawn.

Kingfisher, Europe's top home improvement retailer, beat forecasts with an 8.3 per cent rise in third-quarter profit, helped by cost control and currency moves, but said trading was set to get tougher.

Kingfisher, which runs market leaders B&Q in Britain and Castorama in France, said underlying profit was £176 million in the 13 weeks ended November 1. The mean market forecast in a company poll was 163 million.

Kingfisher, which employs over 70,000 people in more than 800 stores in eight countries, said sales at stores open at least a year fell 5.1 per cent, with strong results in Poland and a market-beating performance in France offset by weaker trading in the UK and a plunge in sales in China.