Kesa returns to the black but extra competition hits sales at Comet

Kesa Electricals said it had returned to profit despite sales at its flagship British chain, Comet, still coming under pressure.

The retailer reported profits of £69.6m in the year to 30 April – up from losses of £81.8m last year. It said profits had improved thanks to its Darty business in France and an overhaul of its underperforming operations. But Comet suffered a 1.2 per cent drop in like-for-like sales after a difficult second half of the year as competition intensified from rivals such as DSG International and new entrant Best Buy. Like other retailers, Kesa issued a warning about the outlook for consumer markets. It said it would stick to its strategy, announced in December, of trying to improve profits and focus more on internet sales – a tactic that has helped annual online revenues at Comet to grow by 8.9 per cent.

Thierry Falque-Pierrotin, the chief executive of Kesa, said it would remain competitive with rivals despite the increase in VAT unveiled by the Chancellor on Tuesday. "We will, whatever happens, follow the market trend in terms of pricing but we also have to keep in mind that in electrical retailing we have substantial deflation," he added.

The company is braced for similar tax increases across its European markets as other countries follow suit with austerity measures. "We are planning for challenging markets ahead," Mr Falque-Pierrotin said.

The World Cup has given Kesa a welcome boost so far in the current year, with recent television sales up by 30 to 35 per cent.

Kesa also outlined plans to roll out a major refurbishment programme and new merchandising ideas. The company will revamp 40 Comet stores this year after successful trials of its new format, with the introduction of laptop and digital camera tables for another 30 outlets. It is also pushing for further cost-cutting in the UK, following a year in which it merged two regions and closed a distribution centre.

Profits on an underlying basis – at £81.9m – beat expectations. Its shares rose 2 per cent to 119.6p.