DSGi's Death Spiral

An article in the UK broadsheet, The Guardian, notes that DSGi's current share price makes its market capitalisation equal to just 10 day's sales - that's about £275mn, or roughly €330mn, or $425mn. The title of The Guardian's article says it all: Bloodbath on the High Street.

In a similarly downbeat article in The Times, Neil Saunders, a Director at specialist retail consultancy, Verdict, said that: "Electricals is one of the sectors that bears the brunt of the slowdown when it gets serious because most people can defer purchases". As far as DSGi is concerned, Saunders said that the retailer: "...isn't optimally positioned, with store standards quite low and service not as good as it could be".

And in The Independent, DSGi's house broker Citigroup is reported as saying that as one of the most operationally and financially leveraged business under its coverage, DSGi: "...is very materially impacted by the current cyclical slowdown/recession. In addition, the business continues to suffer from the structural over-capacity and deflationary trends that have crushed [margins on earnings before interest and tax] over the past ten years."

DSGi will doubtless update the market next Thursday when it announces its half-yearly Interim Statement.