Moody's may cut DSGi

Moody's Investors Service said it has placed the Ba3 corporate family rating and senior unsecured rating of DSG International plc under review for possible downgrade, as the operating performance recorded during the key Christmas period proved weaker than Moody's had expected.

In its trading statement for the 12 weeks ended Jan. 10, DSGi's like-for-like sales declined by 10% and gross margins weakened by 0.8%, resulting from a further reduction in footfall, price deflation and a greater proportion of revenues generated during the sales period, the agency said.

The weaker performance further highlights the challenges facing the businesses within the group prompting the need for assertive corrective actions to halt the negative trend, Moody's added, noting that management has undertaken deeper cost cuts, improved working capital efficiency and is seeing some positive signs from recently reformatted stores but overall the measures undertaken to-date have proved insufficient to stem the decline in credit metrics, which have been hit severely by the present recessionary environment.

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