John Browett, the new chief executive of DSG International, said yesterday it could take years to revive the Currys-to-PC World business as he issued a stark profit warning that sent a shudder through the high street.

Shares in DSG plummeted 27 per cent to a 12-year low of 78p, wiping £520 million from the embattled retailer’s value, as it became the first major casualty of the Christmas spending slowdown.

DSG said a 10 per cent slide in like-for-like sales at PC World since October meant it could miss full-year profit forecasts by £50 million.

It marked the worst possible start to the Christmas reporting season in the City and contributed to a 6 per cent sell-off across the FTSE 350 General Retailers index - the steepest fall since September 2001.

Kesa, the owner of rival electricals chain Comet, dropped 19½p to 215½p while Marks & Spencer and Debenhams also fell after Next said it was “extremely cautious” about the outlook for the coming year.

Analysts said that DSG’s dividend payout could be halved when full-year results come out this summer, while ratings agency Moody’s cut its rating on the retailer’s debt to Baa3 – just one notch above junk status.

Separately, the Office of Fair Trading revealed that it had begun a new investigation into the effects of the DTI’s crackdown on extended warranties, which generate significant profits for Currys and PC World.

Mr Browett, who joined DSG as chief executive last month, told The Times: “It’s not the perfect start but it does not fundamentally change what we need to do; it just makes it easier to go that bit faster.

“I think it could take years rather than months to turn things round. There’s no such thing as quick fixes, but what we are saying is a consequence of where the market is – it is caused by a softening in consumer demand. We have got great brands.”

DSG’s warning, its second in three months, means that pretax profits in the year to April could be £240 million, about 15 to 20 per cent below expectations before yesterday’s update. DSG made £300 million last year.

Sales at PC World plunged 10 per cent in the 11 weeks to December 29 on a like-for-like basis as the chain suffered from poor demand for lap-tops and accessories.

The group’s electricals division reported a 1 per cent fall, with sales down 11 per cent at its UniEuro operation in Italy.

Analysts said that Mr Browett may be forced into a far more radical restructuring and even a break-up of the business, which is facing fierce price competition in the UK.

Shares in DSG had climbed by 10 per cent on Wednesday after Credit Suisse said it believed that Mr Browett may be forced to close up to 200 of the 700 PC World and Currys stores in the UK.

Mr Browett yesterday insisted such a move was “wild speculation”. In light of the latest profit warning, Tony Shiret, the Credit Suisse retail analyst, said: “I think it’s a predictable train crash.”

Experts said further warnings from retailers were inevitable in the coming weeks given mounting financial pressure on consumers from rising mortgage payments, record petrol prices and the threat of higher energy bills.

Richard Hyman, managing director of Verdict Consulting, said: “This is a market for the strong and there are quite a few vulnerable retailers out there.”

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