Kesa considers disposal of Comet as trade deteriorates

Kesa chairman David Newlands said the company is looking at a range of options for Comet, including a sale or formation of a joint venture, while pressing ahead with a turnaround plan which includes selling weaker shops and focusing on profitable ranges such as small appliances.

Comet slumped to a loss of £7.9m in the year to April 30, results which Mr Newlands described as “unsatisfactory and unacceptable”.

“We now have a strong turnaround plan in place and the board decided it was the right time to benchmark that plan against the external alternatives,” he said.

Some analysts questioned whether a buyer would come forward in a market where specialists such as Kesa, Dixons and Best Buy face cut-price competition from grocers and the internet, and where consumers are cutting back on discretionary purchases as household budgets are squeezed.

“It is entirely possible that things could get worse, not least as interest rates haven’t gone up yet,” said Arden Partners analyst Nick Bubb.

Best Buy and partner Carphone Warehouse last week delayed a decision on the future of their fledgling UK megastore business, which some analysts took as a sign they are waiting to see what happens with Comet and could make a bid.

A disposal of Comet could enable Kesa to focus on its successful Darty business in France, switching its listing from London to Paris. Kesa as a whole group could also be sold, with private equity firms like PAI Partners mentioned as potentially interested in breaking up the company themselves.

The company declined to comment on speculation.

Kesa said trading since the end of April had been tough and weaker than internal expectations, with sales of televisions proving particularly poor against a strong performance during the same period last year ahead of the 2010 soccer World Cup.

Analysts at Singer Capital Markets said they expect 2011-12 profit forecasts to be cut by about five per cent.

The announcement comes a month after another high street name, Mothercare, said it was planning to close 110 stores to focus on out-of-town sites.

Kesa posted annual results yesterday showing Comet made a loss of £8.9m in the year to April 30. Total sales fell 6.8 per cent to £1.54bn – down 7.7 per cent on a like-for-like basis.

It added that trading conditions remain tough across the group, with sales below expectations in the early part of the new financial year. Kesa is taking action to improve Comet’s performance through store refits.