Curry’s profit warning is a sign of the times

DSG - owners of Curry’s and PC World has issued a profits warning causing the share price of its holding company to collapse by more than a quarter. Details are here: http://news.bbc.co.uk/1/hi/business/7169208.stm This comes as little surprise. When my Christmas credit card statement comes through the post this week I expect to see a tsunami of references to John Lewis.com, Marks and Spencer.com and Amazon.co.uk. For retailers such as Currys the outlook is bleak. They are having to rely on ever deeper and ever earlier deep discounting of products in their stores, together with a belated development of an online presence. Discounting hits the profit margins of a business - UK consumers are well beyond the stage of responding to 10 and 20 per cent discount levels - it seems that a 50 or 60 per cent discount on the normal retail price is now par for the course. The reality is that hundreds of thousands of their former customers have moved on. A growing and now a hugely significant number are happy to look at and physcially study electronic products in store before heading home to purchase online. And as macro-economic conditions deteriorate, so there is a flight to product quality and true value for money where value for money is mainly a function of price and quality. PC World’s core product brands are second rate and their customer service stinks of mediocrity. Stores are expensive to run and products take up space in store. The PC World business model is now holed in the water, I doubt I shall ever have to step into one of their stores again. Further reading: Sainsbury’s hit by sales worrries: http://news.bbc.co.uk/1/hi/business/7174746.stm M&S sees Christmas sales growth: http://news.bbc.co.uk/1/hi/business/7173752.stm John Lewis sees strong Christmas: http://news.bbc.co.uk/1/hi/business/7171491.stm Curry’s owner issues profit alert: http://news.bbc.co.uk/1/hi/business/7169208.stm Next cautious over 2008 prospects: http://news.bbc.co.uk/1/hi/business/7168562.stm