DSG International, the owner of Currys and PC World, yesterday joined the ranks of companies that intend to close their lucrative defined-benefit pension schemes as it reported a surprisingly strong Christmas trading update.
The retailer said that it had “entered consultation” over the closure of the defined-benefit scheme. The closure of the scheme to future contributions would affect 2,400 of DSG’s 40,000 staff. It would not affect any benefits already accrued, the company said. The scheme has already been closed to new members.
Some 87 per cent of defined-benefit schemes are now closed, according to research released last month by the Association of Consulting Actuaries.
The announcement of the scheme’s closure came as DSG reported booming sales over Christmas. Like-for-like sales across the group rose 8 per cent in the 12 weeks to January 9, far exceeding the City’s expectations.
Sales at stores in the UK recorded 5 per cent growth, offsetting falling sales at PC World. Sales at DSG’s Scandinavian division, a large part of its business, soared 18 per cent.
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John Browett, chief executive, said that his turnaround plan was beginning to bear fruit. It centres on a new generation of megastores — typically about twice the size of its normal out-of-town stores and occasionally combining a Currys and a PC World store in one site — as well as improving customer service.
DSG raised £310 million last May to accelerate its refurbishment programme and to provide extra headroom on its banking covenants.
Mr Browett said that he was confident that the economy would not scupper his attempts to turn the company around.
He said: “It’s very difficult to judge what the shape of the recovery will be — but we are in recovery. While we are in recovery it’s just a question of what that’s going to look like. We don’t subscribe to the double-dip view of the world but it could be a long path out of this.”
Currys benefited from shoppers finally making the “big ticket” purchases of flat-screen televisions and white goods that they had postponed earlier in the recession, suggesting that consumer confidence had returned. Mr Browett said: “This year it was hard to persuade people to buy flat-screen televisions, even though the technology was great and the picture quality fantastic. We saw in the run-up to Christmas and the start of sales, that people were buying big ticket items, deciding they couldn’t put it off any more.”
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Sales in Greece and Spain were flat, which represented an increase in market share in the two recession-ravaged economies, DSG said.
PC World was its worst-performing division, with like-for-like sales in Britain down 3 per cent, despite receiving a boost from the release of the Windows 7 operating system, which prompted many owners to upgrade their computers.
Profit margins fell 0.8 percentage points as DSG attempted to gain market share in Scadinavia by cutting prices.
The group said that it was on track to deliver £50 million of cost savings this year as part of its £200 million four-year cost-saving programme.
Analysts at Credit Suisse said: “The key issue for DSG remains getting through the downturn to allow the benefits of its repositioning and operational gearing to kick in. Our analysis of the borrowing position here still shows significant headroom against covenants.”
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The City expects DSG to make pre-tax profits of about £75 million this year, after last year’s £140 million loss. In the first half of this year it lost £17.6 million.
Shares in the company fell 2.34p, or 6 per cent, to 35.19p yesterday, on general fears over the retail sector.
Philip Dorgan, retail analyst for Ambrian, said: “The whole sector is down. The market’s taking a negative view for retailers’ prospects for the next six months. The short-term news flow won’t be helped by the weather.”
DSG is preparing for the arrival of Best Buy, the giant American electricals retailer due to enter the European market this spring in partnership with Carphone Warehouse.
Halfords’ cold comfort
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The recent cold weather has caused a surge in sales of car maintenance products, Halfords said yesterday. The car equipment and bicycles retailer said that the cold snap before Christmas contributed to an 8 per cent rise in car maintenance sales in the three months to January 1. Like-for-like sales rose 2.3 per cent overall.