Business Briefing: DSG awaits its new leader
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Your support makes all the difference.DSG, the parent company of chain stores Dixons, Currys and PC World, is hoping its incoming chief executive, John Browett, will signal a prosperous Christmas season.
Although the arrival of Browett, formerly head of Tesco, can have little impact on December trading, his spirit will loom over DSG's interim results announcement on Wednesday.
Paul Deacon, a researcher at Landsbanki said: "He [Browett] will need to get his skates on. The company's performance over the Christmas period will set the tone. Any further earnings disappointments... and there must be a risk of a dividend cut." The company recently admitted that it has an oversupply of laptop computers, having over-anticipated demand following the introduction of Microsoft's new operating system, Vista.
But the real ghost at DSG's Christmas feast will be Carphone Warehouse boss Charles Dunstone. Carphone is employing a strategy of growing its broadband business by offering some of DSG's best-selling goods for free. Its offer of a free laptop to anyone signing up for broadband was, say some City analysts, the reason DSG failed to shift as many laptops as it hoped.
Dunstone pulled the rug from under DSG's feet again last week when it announced that new AOL broadband customers would get a free PlayStation 3 games console.
"We see great risks to DSG's computing business model in the UK from this move," said the analyst team at Credit Suisse.
PC World represents a quarter of DSG sales and just under half group earnings before interest and tax. The over-estimation of laptop demand translates into a £20m hit on earnings, said Dresdner Kleinwort.
With some of the group's European operations also having problems in the first half of the fiscal year, the City is uncertain about its full-year figures, with profit estimates for DSG International ranging from £299m to £328m for the year.
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