DSG shares hit by insurance review

Shares in the owner of British electrical retailers PC World, Currys and Dixons were rocked today after an insurer scaled back its cover against the firm being unable to pay its suppliers.

Consumer electronics company DSG International, which operates 30 stores in Ireland, was dealt the blow by the world’s second-largest trade credit insurer, Atradius.

News of the insurer’s move to reduce its exposure to potential losses as part of a wider review of the retail sector sent shares in DSG tumbling as much as 20%.

Other British high street retailers such as JJB Sports and Woolworths have been hit by a similar tightening from other insurers as the retail climate darkens.

An Atradius spokeswoman refused to comment on specific cases, but said: “Every trade credit insurer is looking at the non-essential end of the consumer goods market because consumers are cutting back on spending.”

A DSG spokesman said: “While it is true that Atradius has reduced but not withdrawn cover across the entire retail sector, it is not a DSG-specific issue - it is more about Atradius and how it manages its business.

“Our suppliers still have access to credit insurance, they continue to supply us and there have been no changes to our terms for suppliers.”

But a trading update from DSG last month highlighted the harsh conditions faced by the firm in the UK, following a 7% drop in like-for-like sales for the six months to October 18.

The figure included a 7% drop for the company’s UK and Ireland electricals business and a 11% fall for PC World.

This week the pressure on the sector increased after US consumer electronics giant Circuit City – another company whose trade credit insurance was withdrawn - filed for bankruptcy protection in the United States.

Rival Best Buy yesterday warned of the most difficult climate the firm had ever seen after “rapid, seismic changes” in consumer behaviour in the wake of September’s financial crisis and lowered profits guidance for the year.