Retail sales figures released last week may have been surprisingly upbeat, so much so that the Bank of England’s Monetary Policy Committee members were left scratching their heads in bewilderment as to why consumers had shopped ‘til they dropped in May to produce the biggest monthly increase in retail sales since 1986. But Cityblogger notes that it’s a different story today. The FTSE100 is down more than 30 points, despite the US Federal Reserve leaving rates on hold yesterday evening at 2 per cent, and it’s all due to worries about retail and the continuing consumer slowdown.

Investors are jittery after DSG unveiled a painful slump in profits this morning due to large impairment charges relating to a reshuffle of its Italian arm. The company behind electrical goods brands Currys, Dixons and PC World, revealed that underlying profits for the full year to 3 May 2008 fell a whopping 30 per cent to £205.3m (from £295.1m in 2007) this year. And these figures, while admittedly in line with expectations, came despite an 8 per cent hike in sales compared to (£8.5bn) those posted last year (£7.9bn in 2007). Slightly worryingly, DSG had little to say on the subject of current trading besides pointing out that conditions are “challenging” and that the economic backdrop “continues to be difficult”. All of which concerned some analysts.

Ramona Tipnis, analyst at Oriel Securities, reiterated her sell recommendation on the shares. She believes that while they trade on a relatively undemanding price earnings multiple for 2009, there could more gloom in the offing. “There is more downside to come given the deteriorating trading outlook,” she says. However, Nick Coulter at broker Numis is slightly more optimistic, raising his recommendation from reduce to hold, although he also cut his target price on the shares from 52p to 45p and admits that pressure will continue to fall on the high street and electrical goods in particular.

DSG shares fell just under one per cent but later recovered, rising just over 1 per cent, while shares in Marks & Spencer, Tesco, Carphone Warehouse and Next dipped in sympathy.

Elsewhere in the markets, the banks continue to receive a pounding. Shares in Barclays, in which the Qatari Investment Fund – also an investor in Sainsbury’s – is rumoured to be buying a 10 per cent stake, were down by nearly 7 per cent this lunchtime. This is despite favourable noises from investors about Barclays’ decision to strengthen its balance sheet through a £4.5bn share issue.

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