French owner looks to offload 248-store retailer, which made losses of �9m last year as consumer confidence dived
The struggling electricals chain Comet was formally put up for sale on Wednesday as its French owner looks to rid itself of the loss-making UK retailer.
The 248-store chain, which has 10,000 staff, racked up annual losses of nearly �9m last year. "We've had some expressions of interest but I am not going to say who from," said Kesa's chairman, David Newlands.
A strategic review will also consider the merits of a joint venture or hanging on to Comet and turning it around.
Waning consumer confidence has had a dramatic impact on the fortunes of Comet and store-group rivals that specialise in household goods like TVs and computers. Comet turned a profit of �11.5m in 2009-10, but was laid low by steep sales declines which saw like-for-like figures tumble 15% in the final four months of its latest financial year, which ended on 30 April. Rival Argos reported a 20% plunge in sales of electricals ? particularly televisions and video games ? during the spring.
Kesa said the grim trend had continued in the first quarter, with trading "tough and weaker than our expectations". The pattern had also been skewed by the strong demand for TVs before last year's football World Cup.
The reluctance of consumers to open their wallets is also having a dramatic knock-on effect on suppliers. Philips, Europe's largest consumer electronics producer, blamed a profit warning on flagging sales at its consumer division, which makes gadgets like toasters and shavers.
That warning follows last week's update from home appliance giant Electrolux, which said it would increase the price of its cookers, vacuum cleaners and dishwashers to reflect the soaring price of raw materials such as steel, plastics and chemicals. Market leader Whirlpool has already pushed through price increases.
Philips, which has been struggling to compete with lower-cost Asian manufacturers, is being overhauled by new boss Frans van Houten. The restructuring expert, who joined in April, has already hived off its loss-making TV business into a joint venture with Hong-Kong based TPV.
Some analysts questioned whether a buyer for Comet would materialise given challenging market conditions, and Kesa shares were virtually unchanged at 134p. Last week Carphone Warehouse said its fledgling Best Buy chain made a loss of �62.2m in its first year and delayed taking a decision about its future.
Even the mighty Tesco is struggling to get shoppers into its electricals and homewares departments as consumers cut back on discretionary purchases. It has even been suggested that Kesa might have to pay a dowry to rid itself of Comet. Nomura analyst Christopher Walker said that Comet had a strong market share, but given that it was loss-making "valuation was a key issue".
Kesa's group's biggest investor is Knight Vinke, the activist shareholder, and it is expected to look kindly on the off-loading of Comet, as it would free management to concentrate on the successful Darty chain, which is the market leader in France.
Group profits finished up 2% at ?93.2m (�83.4m) thanks to a strong performance from Darty. Newlands insisted Knight Vinke was not agitating behind the scenes: "The approach we are taking with Comet has been developed by management and approved by the board, not put forward by shareholders."
He said the review would be concluded in months and ruled out the closure or a "radical downsizing" of Comet, which had sales of �1.5bn in the year to 30 April, making it the second-largest specialist after Dixons, which owns Currys and PC World.
Kesa has already begun a shake-up at Comet, with long-serving managing director Hugh Harvey replaced last month by Bob Darke, another company veteran with more than a decade's service. And it has already announced plans to cut the number of regional service centres ? used as a base by engineers who repair and service products ? from 14 to two, a rationalisation that would enable it to go down from three to two warehouses.
The changes, which will result in 110 job losses, will reduce annual running costs by �10m. A tenth of its stores have been earmarked for closure or to be reduced in size this year.
Source: http://www.guardian.co.uk/business/2011/jun/22/comet-put-up-for-sale-by-kesa-electricals-group
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