DSG may be broken up after its sales crash

John Browett, the chief executive who only arrived in December, faces an immediate crisis at a company that may be in more trouble than he realised when he agreed to quit a senior job at Tesco last year.

The company behind PC World, Currys and Dixons, said profits will be as much as £50 million lower than City expectations, a wipeout that may prompt calls for the business to be broken up and sold.

Investors, already reeling from seeing DSG tumble out of the FTSE 100 index, are now worried that the dividend will be scrapped.

DSG shares crashed by 20%, off 21¼p to 86p this morning.

Like-for-like sales at PC World were down 10% in the 11 weeks to 29 December, while the troubled Italian arm continued to be a source of pain, with sales down 11%.

Sales at the UK and Irish electrical divisions were flat, which on the face of it would be reasonable were the group not so reliant on the Christmas period to provide profits.

Chairman Sir John Collins said: "Overall trading for this important period, in which over half of our annual profits are usually generated, has been disappointing, particularly in the UK, Italy and Spain." Its outlook for the rest of the financial year is also "more cautious".

DSG was surprised by the lack of demand for laptops. Margins on flatscreen TVs have slumped due to marketing costs, said the group.

Analysts, who had previously been predicting pre-tax profits of between £290 million and £300 million, were left scurrying to issue downgrades.

Browett did a series of presentations to the City before Christmas and impressed observers with how quickly he has grasped the workings of the industry.

He was keeping a low profile today, perhaps to distance himself from the management decisions that led up to the profit warning.

Finance director Kevin O'Byrne called for a further cut in interest rates to relieve the pressure on consumers. He denied talk which spread across City trading floors yesterday that DSG was planning to shut 200 of its 700 stores.

The rumours did little to reassure staff already nervous that job cuts may be necessary to offset tumbling sales.

DSG has faced stiff competition from cut-price online operations and Carphone Warehouse, which has been giving away electrical goods as part of its internet broadband package.

In November, DSG recorded a 26% fall in first-half profits to £52.4 million, numbers Sir John also admitted were "disappointing".

Analysts say Browett is now under pressure to come up with a radical new strategy for DSG, perhaps including selling off the Italian arm and completely overhauling PC World.

He could look to rejig senior management positions.