Kesa warns on profits after snow hits Comet

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The Independent Online

Kesa Electricals has become the latest retailer to blame the snow for a profits warning after a "horrible" fall in festive sales at its Comet chain in the UK.

The pan-European electricals group – which also owns the Darty chain in France – said that hefty discounting in the UK market had hit gross margins at Comet. Compounding its woes, underlying sales at Darty's operations in Italy, Spain and Turkey plummeted by a combined 8.8 per cent from 1 November to 18 January. As a result, Kesa warned its full-year profits would now be at the lower end of market expectations of €98m to €119m, compared with the €77.8m delivered in 2009/10.

The poor performance at Comet, which accounts for nearly a third of Kesa's sales, is likely to lead to renewed speculation that the activist investor Knight Vinke may push for a break up the group. Knight Vinke, which owns 11 per cent of Kesa, has repeatedly declined to comment on its stakebuilding that first emerged last year. The festive woes at Kesa in the UK followed retailers including HMV, Mothercare, Theo Fennell and Clinton Cards blaming the snow for profit warnings earlier this month.

Across the group, Kesa said the "adverse weather" had a 2 per cent impact on sales.

Kesa now expects Comet to post a "small retail loss" for the year. This followed the UK retailer delivering a 7.3 per cent fall in sales at stores open at least a year.

Kesa said: "Comet delivered record trading from Boxing Day through to the new year weekend, but this strong performance failed to offset the weaker sales seen early in December due to competitive trading and adverse weather conditions."

While Comet is likely to have benefited sales of big-ticket items before VAT rose to 20 per cent on 4 January, sales had "softened" since the tax hike. In further bad news, Comet blamed "highly promotional" activity in the UK market for a fall in gross margins of 140 basis points over the period. David Jeary, at Investec, said: "This is a horrible performance from Comet." Comet said its web sales only grew by a lacklustre 3 per cent, following "disruption" from a new platform introduced in November.

However, Darty France performed much better and like-for-like sales only fell by 1.8 per cent.

Thierry Falque-Pierrotin, the chief executive of Kesa, also cited the "robust performance" of Kesa's other established businesses, such as Vanden Borre and Datart, and group online sales up 11 per cent.

Total revenues at Kesa grew by 0.4 per cent, but fell by 4 per cent on a like-for-like basis. Kesa has signed a new €455m revolving credit facility over five years, which will reduce its interest charges by €3m a year.

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