DSG Warnings Drive UK Stocks Lower

123jump.com Staff
18 Oct, 2007
New York City

UK stocks closed lower as retailers came under pressure. Electronics retailer DSG International lowered its earnings guidance by 20 million pounds. DSG fell 8.8%. September retail sales rose 0.6% after gaining 0.7% in August. Other retailers fell as well. Kingfsher fell 4.2%, Home Retail dropped 3.5%, and Marks Spencer dropped 1.7%.

[R]1:00PM New York, 6:00PM London - DSG International earnings warning hurt retailing stocks in the UK.[/R]

In London, the FTSE 100 shed 1.02% or 68.3 at 6,609.40. The U.K. shares reversed Wednesday gains on heavy loss by the retailer DSG after it lowered its profits outlook for the first half of the year.

European shares also fell Thursday afternoon, pressured by weakness in the banking sector, as investors considered mixed earnings from companies such as Nokia, SAP and Nestle.

Of the FTSE 100 index stocks, 20 advanced, 81 declined, and 1 remained unchanged.

September retail sales increased 0.6% after gaining 0.7% in August according to the Office for National Statistics.

DSG International warned that its earnings in the first half will be lower by 20 million pounds on lower than expected sales of computer products at its UK unit PC World retail chain. The Euro-wide electronic retailer lowered its gross margins by 2%.

Chairman John Collins said, “PC World delivered good sales performance against a tough prior year comparative in the back to school period. The reduction in laptop stocks that arose out of disappointing sales of VISTA related products and a changing sales mix have reduced gross margins by around 2% in the computing division, impacting Group profits by around £20 million in the first half. Stocks are now at normal levels and we expect to recover some of the lost margin through the second half.

Our performance in Italy remains disappointing with a weak consumer backdrop continuing to affect sales growth. We continue to reposition the UniEuro brand and improve our proposition to the customer supported by the restructured operational base.”

DSG International stock fell 8.75% to 124.10 p. DSG operates the retail chains under the names PC World, Dixons and Currys store chains in the U.K, and UniEuro in Italy.

Other London-listed retailers also trading lower, included home-improvement retailer Kingfisher which shed 4.2%, Home Retail slipped 3.5% while Marks & Spencer retreated 1.7%.

On Wednesday, Scottish & Newcastle lifted the London shares on speculation that two suitors were eyeing a significant stake in the largest brewer. The share advanced 1.5% to 757p after surging 19% on Wednesday.

The International Monetary Fund warned that the property boom of the past ten years has left the UK housing market vulnerable to price declines.

Of the FTSE 100 shares, DSG led the decliners followed by losses in Taylor and Wimpey of 5.2%, Barratt Development of 5.1%, Hammerson of 4.7% and Wolselley Plc of 4.7%.

Of the index stocks, Smith and Nephew led the advancers with a rise of 2.7% followed by increases of Rexam of 2%, Mitchells of 1.6%, British Airways of 1.5% and Imperial Tobacco of 1%.

The pound rose to $2.04 and against euro closed at $1.4299.