DSGi’s offloading of its Hungarian Electro World business for the princely sum of €1 makes business sense, even if it is another setback to the retailer’s international ambitions.
It was only a decade ago that the electricals group set sail for foreign climes, a shift hailed at the time as transformational. Until recently, overseas expansion has been regarded as a retail grail. But the rewards have often proved as elusive.DSGi is not the only retailer to have hit trouble abroad. China, once a beacon of Kingfisher’s business, is now one of the biggest problems in its portfolio. And Tesco’s American dream, while no nightmare, is not yet sweet.
So should UK retailers stick to their knitting and stay at home? The question might be asked of Marks & Spencer, which, despite a near-40 per cent profits fall, said on Tuesday that global scale remains a key priority.
Despite the risks, overseas remains a compelling growth route for UK retailers. In the past, problems in one country might be counterbalanced by success in another. During a global recession that is much less likely, but development should still not be forgotten.
Tesco might have its difficulties in the US, but its overseas presence has helped make it the force that it is. If it had not ventured into Europe, UK consumers might never have seen the hypermarket model that Tesco imported into this country and shareholders might not have enjoyed the subsequent returns.
Overseas might look like a retail graveyard, but it is likely to re-emerge as a prerequisite for success.
Marks & Spencer investors on side?
Five years ago, Marks & Spencer boss Sir Stuart Rose was being feted by private shareholders after seeing off Sir Philip Green’s bid.Today, small investors – who often hold shares for income rather than to trade – are probably less enamoured of Rose after Tuesday’s dividend cut.
Rose has in the past relied on private investors’ support during controversies. They may now be less amenable.
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