DSG International has cut £75 million from operating costs, through an aggressive IT and business change programme.
But slow electrical sales plunged the company into near £30 million loss in the first half of its financial year.
The technology and white goods retailer, which owns Dixons, Currys.digital and PC World stores, has been improving processes, stock control and back office systems, as well as closing stores, in two cost cutting programmes.
The cost improvements were vital as the global economy entered a recession, DSG said, as it announced it had plunged into a £29.8 million loss in the half year to 18 October. This compared against a £52.5 million profit in the same period a year earlier.
In a tough week for retailers, Woolworths and MFI have both gone into administration.
“[DSG] is prepared for a recessionary environment and is consequently focused on cash generation,” the group said in a statement. “This includes reducing costs, optimising money margin and tight stock control, while continuing to deliver on the renewal and transformation plan.” In the first half of the year, Dixons reduced capital expenditure by £30 million year-on-year, to £160 million.
John Browett, chief executive, said the company was “prioritising cash generation as well as tightly managing stock, money margins and costs”. Progress on the change programmes were “rapid”, he said, but warned that the outlook remained difficult.
Under an existing plan called One Group, DSG has been moving to a common operating model across its stores, which it anticipated would reduce costs “significantly”. It is simplifying business processes as part of the programme, and improving systems and decision making.
By having one set of business processes, DSG said it would be able to improve operations more quickly across the company.
In May, DSG announced an additional plan, Step Change, that will target £50 million savings. Under that programme, DSG is removing process duplication, and creating a more efficient setup in its head office, supply chain and stock management. It intends to reinvest these savings into improving customer service.
The DSG e-commerce operation increased sales by nine per cent to £276 million, generating a £1 million profit. Next year, Dixons.co.uk will move onto French counterpart Pixmania’s unnamed e-commerce platform.
DSG closed 18 stores on the half year, and is targeting another 25.