An effective chief executive is essential for any retail business. The period of uncertainty when an incumbent decides to step down, then as the new boss takes time to find out more about the business and find his or her feet in the company inevitably leads to a period of instability on which rivals try to capitalise.
Add in a protracted notice period for the new chief executive, which means three months without one and then the misfortune of a severe illness for the chairman who is running the ship during the interregnum and things get particularly tricky. This is the plight of DSG International this year.
In the circumstances, the company appears to be coping well. Yesterday’s trading update showed generally robust sales across this geographically diverse business, with the exception of the perennial dog which is Italy.
The company will also take a£20 million hit from lower-than-expected sales of Microsoft’s new Vista range, which has failed to live up to the launch hype. However, overall, the UK business is in decent shape despite the greater consumer caution, while – as always, it seems – the Scandinvian business has gone from strength to strength.
However, the City didn’t like yesterday’s numbers, with the shares dropping nearly 9 per cent to 124p. Last November they were trading at almost 100p more. Of course, DSGi is not alone among retail stocks in being hit by a big fall in its share price, but the concern that the company is lacking clear direction while it waits for new chief executive John Browett to arrive, coupled with chairman Sir John Collins’ cautious words on Christmas, is bound to have dented confidence.
However, with Collins, who is fortunately recovering from his illness, and able finance director Kevin O’Byrne at the tiller, the ship is in steady hands. Last week’s decision to put electricals veteran Per Bjorgas in charge of Italy shows that important decisions are still being made. But what will be really interesting is what happens when Browett arrives in December.
DSGi has been extremely well run by John Clare during what has been a turbulent period in electricals retailing. But the overall strategy and style of management has been incredibly consistent since the era of Lord Kalms. Browett has a reputation as a pioneer and has none of Clare’s Dixons heritage – it would be surprising indeed if we don’t see some major changes in strategy.
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