DSG International, the group behind Currys and PC World, today became the latest high street retailer to cut its investment plans as it gave warning of a sharp fall in consumer confidence in recent weeks.

The retailer said capital expenditure would fall by £30 million, or 16 per cent, to £160 million this year as it looks to save cash amid some of the toughest trading conditions for two decades. It refused to rule out a dividend cut at its forthcoming interim results.

A trading update showed that sales at Currys had fallen by 7 per cent on a like-for-like basis in the 24 weeks to October 18 and by 11 per cent at PC World. Sales also dropped across southern Europe and Norway.

John Browett, who joined as chief executive in December last year, said: “We have seen a further fall in consumer confidence, we can’t tell how long it will last but we are acting accordingly.”

Mr Browett said that even the previously buoyant markets for laptops and flat-screen TVs had stalled amid the financial turmoil. However, he called on commentators to take a reality check over the health of the retail sector following a recent wave of negative forecasts about Christmas and predictions of a jobs cull in retail.

He said: “I’ve operated in a lot of recessionary environments, I’ve seen very very bad markets before. This is not the end of the world. I’m a bit surprised by the armageddon in the headlines. We are in a recessionary environment but it doesn’t feel like a global slump of epic proportions.”

Mr Browett promised that the lower investment level this year would not affect the group’s renewal and transformation plan, which is centred on a makeover of dozens of tired PC World and Currys stores and the introduction of new formats.

A 55,000 sq ft Currys Megastore near Birmingham took £2.3 million in the first days of trading earlier this month.

Mr Browett said: “We are going full speed ahead with the renewal and transformation programme. We will go as fast as we humanly can.”

He reiterated that the impending arrival to Britain of Best Buy, the American electrical retail giant, was not a concern. Best Buy plans to open three to four trial stores next year after its recent acquisition of 50 per cent of Carphone Warehouse’s retail interests.

Shares in DSG have fallen by 90 per cent in the past two years. They edged 2p higher to 25.5p amid widespread relief that the trading update was not even worse. DSG also reassured investors that was not at risk of breaching its banking covenants.

Analysts still cut profit forecasts for both the current financial year and 2009-2010. Nick Bubb, of Pali International, cut his forecast for this year by £10 million to £80 million.

“Management are applying a lot of energy to the vital task of improving the merchandising, ranges and service at Currys/PC World ahead of the entry of Best Buy to the UK next year, but group profits are still falling,” he said.

“With earnings per share disappearing and the dividend likely to be eliminated next year, DSG is becoming a hard stock to value conventionally.”

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