Poor festive sales hit Dixons profits

DSG's profit warning has fuelled speculation that it will close underperforming stores

Dixons Stores Group has warned that poor Christmas sales will result in profits falling £50m below analyst predictions.

The company said that sales at PC World were down 10 per cent over the 11 weeks to 29 December and by eight per cent overall.

DSG shares fell over 20 per cent in morning trading as City investors reacted to the news.

Sir John Collins, DSG group chairman, said: "Overall trading for this important period, in which over half our annual profits are usually generated, has been disappointing, particularly in the UK, Italy and Spain.

"This weaker trading, together with a more cautious outlook for the balance of the year, means that we now expect full-year profits before tax to be some £40m to £50m lower than current expectations."

Britain, Italy and Spain were the worst performing markets for the group, according to the unscheduled market update.

Pre-Christmas sales of laptops were much lower than expected as consumers appeared to wait for the sales before splashing out.

"Concerns for the health of the consumer [market] going into 2008 have been underlined today," said Keith Bowman, an equity analyst at stockbroking firm Hargreaves Lansdown.

"Profit margins remain pressured via a combination of increased promotional activity and consumers' growing addiction to sale prices."

Today's profit warning is the second from DSG in three months, after the company said in October that the lack of demand for Vista was hurting sales.

The news has increased speculation that DSG will begin a closure plan for many of its underperforming stores.

The company has 700 PC World and Currys stores across the country, and as many as 200 are rumoured to be earmarked for closure.