Downbeat results and gloomy outlooks at leading retailers DSG and Kingfisher underlined the severity of the economic slowdown on Thursday, as Woolworths collapsed into administration.
By James Davey and Mark Potter
Retailers are struggling with intense competition and a downturn in consumer spending, amid sliding house prices, rising unemployment and fears the country has already entered recession.
DSG International, Europe's second-largest electrical goods retailer and owner of the Currys and PC World chains, swung to its first first-half loss for at least 25 years and axed its dividend, sending its shares down 5.4 percent by 3:03 p.m..
"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.
Kingfisher, Europe's top home improvement retailer which runs market leaders B&Q in Britain and Castorama in France, beat forecasts with an 8.3 percent rise in third-quarter profit but said trading was set to get tougher.
Its shares were down 2.3 percent.
Confirmation of Woolworths' decision to put its stores and its Entertainment UK units into administration came a day after MFI, a privately-owned furniture and fitted kitchens specialist, collapsed into administration. The demise of both groups would threaten 31,000 jobs.
Figures in October from the Confederation of British Industry showed sales volumes falling for a seventh straight month, while comments from John Lewis -- closely watched as an indicator of retail trends -- indicated department store sales would likely show a year-on-year drop for an 11th week in a row.
Mark Price, managing director of John Lewis's supermarket arm Waitrose, also warned the retail environment was likely to get tougher.
DSG, which also runs Elkjop stores in the Nordic region and UniEuro outlets in Italy, fell to an underlying pretax loss of 29.8 million pounds in the 24 weeks to October 18 from a profit of 52.4 million a year ago.
SHARP FALL
Shares in DSG, which operates 1,200 shops and online stores in 28 countries, have slumped 88 percent over the past year, hit by the sharp fall in demand for big ticket items, worries over U.S. rival Best Buy's entry into Europe next year and concerns over the withdrawal of credit insurance for suppliers.
The company's market value has dropped to around 226 million pounds -- less than 11 days' sales.
Chief Executive John Browett was adamant DSG would not mirror the fate of Woolworths, whose board placed its 815-store retail business and entertainment wholesale distribution business into administration, a form of creditor protection.
"I don't think it could be another Woolies situation, I think it's a completely different situation ... the parallels just don't work," he told reporters.
Analysts at Citi, DSG's joint house broker, repeated their "sell" recommendation, citing significantly deteriorating newsflow across the sector and recent John Lewis data.
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 percent in the 13 weeks to November 1, with strong results in Poland and France offset by weaker trading in the UK and a plunge in sales in China.
The stock was down 5.3 pence at 114.1p.
"There are clearly more challenging times ahead and we are concentrating on trading effectively in difficult markets by managing our working capital, cash and costs tightly," Chief Executive Ian Cheshire said.
Kingfisher's shares have more than halved in value over the past 18 months but have steadied since July on hopes that Cheshire's recovery plan -- a mix of cost savings and expansion in stronger markets like France and Poland -- might bear fruit.
Analysts at Investec remain sellers. "UK like-for-like sales are heading towards double digit declines and the margin outlook for quarter four in both UK and France is much tougher," they said in a note, adding "China looks horrible."
Woolworths' administrator Deloitte said its retail and entertainment distribution businesses would continue to trade and employees would be paid. It appointed restructuring specialist Hilco to assist in the management of the stores.
Deloitte said it had received expressions of interest from a number of parties for both the retail and wholesale businesses.
In another sign of the uncertain retail outlook, billionaire Philip Green said he had decided against bidding for men's fashion retailer Moss Bros, whose shares slumped 41 percent.
(Additional reporting by Rhys Jones; Editing by Chris Wickham and David Holmes)
LONDON (Reuters)