Comet profit warning shocks investors
Thursday 11 September 2008
The retail sector is continuing to suffer at the hands of the housing market slowdown with the Comet electrical goods chain warning yesterday that it is heading for a loss because of disappointing sales of refrigerators and washing machines.
The company, part of the pan-European Kesa Electricals giant, believes that people are unable to move home and are not splashing out on new household appliances. Comet is also suffering because more people are shopping online.
The scale of the setback during the three months of the year to the end of July surprised analysts. Sales at the chain of 251 stores fell by a thumping 9.9 per cent. This is far worse than the rival electrical chain Currys, which has reported sales 7 per cent lower.
The company defended its position and said it had protected margins by refusing to slash prices to draw buyers into its stores. "One day the cycle will tick up – in the meantime the business is refusing to chase unprofitable revenue," said an adviser. Sales of laptops and televisions were more resilient, although the company admitted "we now anticipate Comet will make a loss in the first half".
Kesa's arguments did not satisfy the stock market, which marked its shares down by nearly 10 per cent. Analysts slashed profit forecasts for the current year. Overall, Kesa, which takes in the French electrical chain Darty and other retail outlets operating throughout Belgium, Holland and Slovakia, reported a 4.7 fall in sales for the opening quarter. Darty fared better than Comet with sales down by 3.2 per cent, but conditions in France remain tough and the scale of the slowdown also caused concern in the market.
Nevertheless, the chain remains on the lookout for suitable acquisitions. Darty had 150,000 subscribers at the end of July for its Darty Box, a combined internet, digital-television and telephone package and is hoping to sign up another 100,000 customers by next April.
Jean-Noel Labroue, the chief executive, said: "We are still in the middle of the storm. Trading conditions across all our markets deteriorated particularly in the UK and have not changed since the period end.
"As we did not expect to see any improvement in the short term, we put in place a robust action plan to protect margins, adjust costs and generate cash."
Elsewhere, Kesa's newer ventures in Spain proved disappointing, "reflecting very poor market conditions".
Stock analysts at Landsbanki warned: "Growth of the internet channel looks likely to create major problems threatening both market share and margins."
The concern was shared by the broker Citi, which said the deterioration across the group "should surprise the market on the downside". It expects a fall of 10-15 per cent in profits for the year to £115m-£120m. The shares finished 15.5p lower at 142.5p.
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