The City was disappointed that Browett’s plan would not deliver a quick fix for the international store group’s problems, that they have had to cut forecasts for this year and that benefits of the improvement drive will not be evident until 2009/10.
Browett intends to revive the group – which has been beset by problems in its domestic territory and overseas markets such as Italy – with a five-point plan. He aims to provide an “unbeatable combination of value, choice and service” and transform DSGi operationally.
JP Morgan’s Simon Irwin believes Browett’s proposals were well-researched but “light on flair and detail”. Investec analyst David Jeary said the plan was “short on many numbers” and noted: “The emphasis appears to be on improving trading rather than space rationalisation and restructuring. We do not believe this is what investors wanted to hear.”
But Shore Capital’s John Stevenson said: “This is not a quick-fix overhaul with a handful of short-term, headline-grabbing bullet points. Indeed, the recovery strategy will not set the world alight with radical, surprise plans – rather, it is the detailed execution of business change and retail improvements that will prove critical to delivering a sustainable improvement in profitability.”
Pali International analyst Nick Bubb said: “John Browett did well at Thursday’s presentation, with lots of energy and enthusiasm and intelligence applied to the task in hand but, given the economic background, things will get worse before they get better.”
Browett believes DSGi can generate an EBIT margin of 3 to 4 per cent in the long term and pledged to “change the very DNA” of the business. He said, in the past, DSGi had focused on product and price to the exclusion of changing customer needs, but his programme would change that. “This is a fundamental cultural shift. We are going to make this business almost unrecognisable from what it is today,” he said.
Many improvements are likely to be imported from Elkjøp, DSGi’s Scandinavian arm. As well as Elkjøp providing sales and service lessons, a new UK store model has been inspired by its store in Lorenskog, Norway.
Browett is altering the product mix in the PC World and Currys chains. A remodelled PC World in Enfield, London has received good customer feedback.
About 77 underperforming Currys.digital stores are likely to be shut as leases expire in the next few years. The remaining 100 will focus on portable technology such as laptops and PDAs.
Browett said the internet – which is expected to eventually account for 30 per cent of group sales – was an opportunity not a threat and would never replace shops. And he is convinced that, despite online rivals and the growing power of supermarkets in electricals, DSGi has a future.
He said: “If you look at every market in the world – take the US, which you couldn’t describe as uncompetitive – in the end the specialist retailer has won.”
DSGI’S five-point Plan
Genuine customer focus
Portfolio review, potentially leading to abandonment of PC City in Spain and Electro World in central Europe
Business transformation
Winning in online market
Cuts in operating costs, starting with a£50 million target in the first year
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