Kesa braced for Comet loss

COMET parent company Kesa Electricals today warned of a full-year loss for its UK operation after festive sales plunged 7.3 per cent.

Kesa blamed strong competition and the extreme weather for its like-for-like sales disappointment between November 1 and January 18.

It said record trading since Christmas failed to offset last month's woes, while the VAT hike on January 4 caused the new year recovery to soften.

Kesa now expects to report a small full-year retail loss for Comet and cautioned overall group profits for the period to April 30 were set to come in at the lower end of market forecasts.

The poor performance in the UK was mirrored in Kesa's Italian, Turkish and Spanish operations, where it trades as Darty.

These markets saw like-for-like sales drop 8.8 per cent, leaving group sales down 4 per cent despite more resilient trading at Darty France.

The pre-Christmas snowfall in Britain, together with adverse weather in France, the Netherlands and Belgium during its key trading period knocked at least 2 per cent off sales, said Kesa.

Kesa said Comet was forced into heavy discounting amid an increasingly competitive market against rivals such as Currys owner Dixons Retail and Carphone Warehouse's Best Buy joint venture.

This left Comet's profit margins down over the Christmas period, while the chain was also hampered by a slowdown in internet sales after the introduction of a new software platform in November. Online sales rose 3 per cent, against 8 per cent in the half-year.

Christmas was also difficult for other consumer electronics retailers, with Dixons issuing a similar alert over annual profits last week following a 4 per cent drop in UK and Ireland sales.

And Argos saw like-for-like sales drop 4.9 per cent in the Christmas quarter, according to parent Home Retail Group.

Singer Capital Markets said Kesa's trading blow implied a downgrade of around 10 per cent to 15 per cent - or 10 million euros (8.4 million) - off market forecasts.

The City had been expecting Kesa profits of between 98 million euros (82.5 million) to 119 million euros (100 million).

Retail experts at Investec Securities describing the Comet sales result as "horrible".

Kesa's interim results recently showed Comet was already under pressure before last month's challenging trading, with losses nearly trebling to 6.4 million euros (5.4 million).

It launched a three-year recovery plan for its 249-strong Comet chain last year that involved refitting stores, sharper pricing and changing its product mix to include more kitchen and beauty products and accessories.

The group today said it had put in place a "number of additional measures" to improve revenue and cut costs, such as ramping up customer service and expanding its online offering with a greater focus on its 'click and collect' offering.