Comet fails to come to rescue of Kesa

A sharp drop in French furniture sales has hit profits at Kesa Electricals after a disappointing Christmas, the group admitted yesterday. The group's BUT furniture arm suffered an 8.6 per cent drop in like-for-like sales, which was worse than analysts had expected.

Shares in Kesa, formerly part of Kingfisher, tumbled 5p to 258.5p. It is the second time in two months the group has warned stronger sales of new technologies such as flat-screen televisions are putting its profits margins are under pressure.

Jean-Noel Labroue, the chief executive, said: "We anticipate that overall the group will deliver results for the full year towards the lower end of current market expectations."

The problems at BUT overshadowed a better performance from the group's Comet chain in the UK, which reported a 2 per cent drop in underlying sales from 1 November to 8 January.

This came one day after DSG International said its Currys chain grew like-for-like sales by 3 per cent and its Dixons chain by 8 per cent, although Comet's sales included two extra weeks when trading was slower across the high street. The only bright spot for Kesa was its French chain Darty, which managed a 2.5 per cent increase in underlying sales. This helped to limit the decline in like-for-like group sales over the period to 0.3 per cent.

M. Labroue said: "Following a difficult period in November, all our electrical businesses experienced better sales performances in the key peak trading period. As predicted, this was driven by strong sales in new technologies while sales of the more traditional white goods continued to be weak."

Electrical goods retailers have had a tough year because although sales of new digital products such as MP3 players have soared, the collapse in the number of housing transactions has knocked demand for white goods, which have more stable margins.

Seymour Pierce cut its profits estimate for Kesa to £147m from £154m. Rhys Williams, at the broker, said: "With demand coming through only on the lower-margin new technology products... cost growth will be hard to offset going forward."