Comet's slide into the red forces Kesa to ready the for-sale sign

Kesa Electricals has admitted for the first time that it is considering selling off its Comet chain after the British company sank to a loss of nearly £9m last year.

The pan-European electricals giant – which operates the Darty chain on the Continent – also said it would close or sell 17 Comet stores in the next three years, consolidate 14 regional service centres to just two and close a warehouse.

David Newlands, the chairman of Kesa, said: "We have a strong turnaround plan for Comet to restore its profitability in the medium term and, in parallel, we are examining strategic alternatives to ensure the best overall value for shareholders."

Knight Vinke, the activist investor with an 18 per cent stake in Kesa, is keen for it to offload Comet and focus on its successful Darty business, notably in France. But Kesa said the decision to look at its options for Comet was its own. Knight Vinke declined to comment.

Mr Newlands said Kesa had already received a few expressions of interest in Comet and its 249 shops. Comet is trying to turn around its fortunes by introducing dedicated areas in 190 stores for higher-margin accessories, refitting core branches and improving its customer service.

In the year to 30 April, Comet's margins came under pressure as weak trading forced it to discount products. Like-for-like sales fell 7.7 per cent over the 12 months but tumbled 15.2 per cent in the final 16 weeks. This weak trend is thought to have continued since its year-end.

Comet sank to a loss of £8.9m over the year as sales fell 6.8 per cent to £1.54bn. It made a profit of £11.5m last year. Adam Cochrane, an analyst at UBS, said: "As expected, Comet is persevering with its previous strategy including rebranding, €11m in back-office cost savings, focus on accessories and exiting five to 10 stores per annum as leases expire."

Total revenues at Kesa rose by 2.2 per cent to €5.92bn (£5.3m). But its bottom line was hit by exceptional restructuring costs of €30.9m related to Comet's turnaround and difficulties at its Spanish division, which resulted in the group posting a pre-tax profit of just €30.7m, down from €43m last year.

Comet is not the only UK electricals chain in the doldrums as shoppers shun purchases of big-ticket items such as televisions and washing machines. Today, Dixons Retail, owner of Currys and PC World, is likely to add to the gloom by reporting a 6 per cent fall in annual pre-tax profits to £85m. Meanwhile, Best Buy UK, the retail chain 50 per cent owned by Carphone Warehouse, is reviewing the future of its 10 "big box" electricals shops after losses ballooned to £62.2m in the year to the end of March.

In stark contrast to Comet, Kesa's Darty France chain powered ahead last year and grew its retail profits by 11.9 per cent to €149m. Darty, which has 224 stores in France, enjoyed a 4.6 per cent leap in revenues to €2.92bn.

But Mr Newlands expects "all its markets will remain challenging" for the current financial year. Kesa, which also has operations in countries such as Spain and Italy, has recommended a total dividend of 7 cents a share, up 6.1 per cent on last year.

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