DSG International, the owner of Currys and PC World, reported a 7 per cent fall in sales after a "challenging" start to its financial year. The electrical retailer said that it remained "very cautious about the consumer outlook".

In an interim management statement covering the four months to August 23, DSG said that like-for-like sales were down 7 per cent, while margins were 0.75 per cent lower. Total group sales rose by 4 per cent.

Its UK computing and southern European businesses was particularly badly affected, with sales down 12 per cent. The UK and Ireland electricals business suffered a 7 per cent fall in sales and the Nordic operations were down by 4 per cent.

Online sales at dixons.co.uk and PIXmania were up by 6 per cent.

John Browett, DSG's chief executive, said: "The economic backdrop in which the group operates remains difficult across Europe and we are managing costs and stock levels accordingly."

Mr Browett joined DSG last December. He started a strategic review in May that he promised would "transform the DNA” of the retailer by improving stores and customer service and cutting costs.

The company said today that it had cut costs by £50 million and was targeting a further £25 million in savings this year.

Nearly all DGS's 20,000 sales staff will have gone through a customer service training programme by Christmas. Five PC World stores have been refitted and another 25 will be done, alongside 10 Currys and Currys.digital stores, in time for the peak trading period.

DSG said in May that it would consider the sale of its struggling Spanish and Italian businesses. The company said today that good progress was being made in resolving some of the problems in Italy, including the closure of several loss-making outlets.

Analysts at Blue Oar described the four-month sales figures as "even worse than we feared". The analysts said that they expected a "less awful" sales performance in the second half of the year and that, having already been cut by 50 per cent, the dividend should be safe.

"It’s too early to judge John Browett’s recovery plan and much is going on to carry it through, but numbers like these emphasise the size of the task he faces," Blue Oar said.

DSG also said today that Sir John Collins will retire next year at the annual meeting after six years as chairman. The search for a replacement has started.

Shares in the company fell almost 2 per cent, or 1p, to 51.75p in early trading.

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