And then the retailer formerly known as Dixons dropped its bombshell.
During the 24 weeks to October 24, the retailer suffered an underlying loss of £29.8mn. It is the first loss at the company since at least 1984 – bizarrely, it has said that it has been unable to determine when it last made a loss, it just knows it’s been profitable every year since 1984.
But there is more to this than High Street woes. This company was subjected to a double-bubble whammy. And in a way the story illustrates what happens when there is deflation.
First the numbers. The underlying loss was £29.8mn, from a profit of £52.4mn this time last year. After restructuring costs, its pre tax loss was £61 million. The company now has £149.5 million of net debt from £101.3mn cash a year ago. But it insists it can meet its banking covenants.
The company has scrapped plans to pay a dividend. It has 1,200 stores spread across 28 countries and has been hit by falling sales across the board. In the UK, PC World turned a profit.
In part, of course, the company is being hit by the credit crunch, by its inability to get credit insurance, and by increasing competition from the likes of Tesco.
But, there is another problem.
The consumer electronics industry has itself sat on a bubble of its own making.
How old is your TV? Is it more than nine months old? – well, if so, it is probably out of date.
But, not many of us feel comfortable about upgrading our consumer electronics. If the TV packs up, we get a new one. The digital switchover will force many people to upgrade of course but, really, in recent years, it has become ridiculous.
The consumer electronics industry has also seen classic deflation.
There are too many suppliers, price just keeps falling. That gorgeous LCD TV we saw a couple of years ago at £3,499, now looks old and knackered.
The latest item of consumer electronics has its flush of youth, when it looks simply stunning, and that lasts about three months. From then on, it’s downhill all the way.
And what do we do? Even when times were good and the economy was booming, many of us delayed our purchases, waiting to see what product would be next, waiting for price to fall.
To survive, the industry had to get us to upgrade more often than is really good for us.
The industry had become reliant on us buying products we just didn’t need.
And that is why DSG has suddenly had to dig around in its pen cupboard, finding that elusive red ink, ink it has not had to use since our TV sets showed Kevin Keegan playing football.
© Investment & Business News 2013