Focus on turnaround plan for Comet as sales tumble

Comet’s parent company Kesa said it will keep the chain for the time being, after a search for a buyer failed to secure an adequate price.

The company said it will now focus on a turnaround plan for Comet.

Chief executive Thierry Falque-Pierrotin said: “We announced at our full-year results in June that in parallel to a turnaround plan at Comet we’d assess other strategic alternatives and that process is ongoing.

“We know what we want to do in the UK, we know what we want to do with Comet. The team is focused on delivering the plan, which is really about improving the margin, improving the store efficiency and developing a web-driven, cross-channel policy,” he said.

Comet, which has 30 stores in Yorkshire and the Humber region, said that like-for-like sales fell 22 per cent in the three months to July 31.

Mr Falque-Pierrotin said there was a lack of demand for laptops, televisions and other big-ticket items such as large domestic appliances.

In contrast, iPads, tablet computers, headphones and large TVs with 43-inch plus screens performed well over the period.

Kesa, which also owns Darty France and Dutch retailers Vanden Borre and BCC, reported a 9.9 per cent decline in overall group sales, helped by a stronger performance in France and the Netherlands.

Recent reports suggest talks between Kesa and the last two interested buyers – corporate restructuring specialist Hilco and private equity group OpCapita – have come to a halt.

Mr Falque-Pierrotin declined to comment on any bids Kesa has received for Comet, but said he expects to make a final decision on the chain’s future before Christmas.

He said that Comet, which has around 10,000 employees, will focus on improving margins and a store refit programme.

However plans to revamp the chain could prove hard going given the tough trading environment for electrical goods. The sales performance was hit by tough comparisons with a strong selling period last year due to the World Cup, when television sales surged.

The Comet.co.uk website reported an improving trend throughout the period, but overall internet growth was hit by the decision to align store and web prices. The move led to a reduction in ‘click and collect’ sales.

Kesa said 60 Comet stores will be refitted before the chain’s peak Christmas trading season.

Looking ahead, the company said “market conditions are likely to remain challenging for some time”. David Jeary, an analyst at broker Investec, said he expects full-year forecasts to be reduced following yesterday’s update.

“Comet’s future remains in the balance, with no new news, which the market will find disappointing in our view, as uncertainty remains,” he said.

Comet, as well as other electrical specialists such as Currys’ owner Dixons Retail and Best Buy, face cut-price competition from supermarket chains and the internet.

This is at a time when consumers are cutting back on discretionary purchases due to a squeeze on household budgets.

Last week Dixons posted a 10 per cent fall in first-quarter like-for-like sales.

Analyst Philip Dorgan, at Panmure Gordon, said: “Unfortunately, we have a double whammy of higher trading losses at Comet and developing countries, leading to a complete lack of transparency regarding the scale of the downside to the group.” Analysts at Nomura said they had downgraded the stock to ‘sell’ from ‘hold’.

“With consumer confidence falling to a low ebb across continental Europe and the UK, market conditions are likely to remain challenging for some time,” said Mr Falque-Pierrotin.

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