The electricals chain Comet and the carpet retailer Carpetright have both slashed their dividends and posted tumbling sales and profits, as they warned of a bleak outlook for the retail market over the next year.
Comet, which is owned by Kesa Electricals, posted a loss of £8.1m for the six months to 31 October and revealed that its underling sales in the last quarter plummeted by 13 per cent – the worst performance in its 75-year history. Jean-Noel Labroue, Kesa's chief executive, said Comet had "probably never" suffered a 13 per cent fall in sales and revealed the downward trend had continued since the end of October.
The grim statements from Comet and Carpetright came as Ernst & Young, the accountancy firm, revealed that pre-Christmas discounts and promotions in the UK retail sector have reached record highs– discounts have so far averaged more than 37 per cent of the full selling price since 3 November.
Sales at Comet, which has 252 stores, have been hit by a savage price war on televisions since July and tumbling sales of white goods. Hugh Harvey, the managing director of Comet, said: "If you look at mortgage approvals over the last six months, it is inevitable that people are not refurbishing their kitchens because house prices are down and this clearly has a knock-on effect on the white goods business, and demand for flat-screen TVs is at similarly depressed levels."
Comet has responded with deep price cuts in the flat-screen TV market, but this reduced its gross margin by 100 basis points.
While Comet's underlying sales were down by 11.6 per cent for the half year, Kesa said that underlying sales at its Spanish business were down by up to 25 per cent for the same period. The dire performance of the two countries was largely behind a 71 per cent fall in Kesa's first-half retail profits from £45.1m to £13m. Kesa has written down £114.4m against goodwill and other tangibles at its Menaje del Hogar chain in Spain, which it bought in 2007. This writedown caused Kesa to post an overall pre-tax loss of £103.8m for the half-year.
Kesa, whose other chains include the Darty electricals chain in France and Italy, halved its interim dividend to 1.75p, and said "all the options are open" on its final dividend. The pan-European electricals group stressed the health of its balance sheet and strong net cash position. Kesa's group like-for-like revenues fell by 5.5 per cent.
Meanwhile, Carpetright slashed its interim dividend to 4p from 22p last year, and posted a 67.6 per cent fall in pre-tax profits to £8.8m for the 26 weeks to 1 November. The UK's biggest carpet retailer said the "results for the full-year will be significantly below" the current market consensus.
Lord Harris, Carpetright's chairman and chief executive, said a recovery would probably not take place until 2010 at the earliest and that more retailers would go into administration over the next year. "I think it will be very difficult for these companies whose sales are 30 to 40 per cent down to continue," he said. The group's total sales fell by 11.1 per cent and like-for-like sales tumbled by 13 per cent over the half year.Reuse content