Shocks in store at REC outlets

The announcement yesterday that Yorkshire Electricity and East Midlands Electricity are to abandon their loss-making Homepower stores is more significant than the size of the deal would seem to indicate.

Though the sector has already seen a profits warning from Comet, complaints by Dixons on unfair trading from the regional electricity companies and the decision by Thorn EMI to pull the plug on the Rumbelows chain so far this year, this deal is different. It is the first retail disposal by a regional electricity company since the Trafalgar House bid for Northern Electric.

The Trafalgar House bid is concentrating the minds of the companies and forcing them to consider cutting peripheral businesses before a predator comes in and does it for them.

As John Richards, stores analyst at NatWest Securities, says: "This is the first in a series of similar deals we are expecting. With the exception of Norweb, which is highly regarded, and Scottish Power, which has been expanding aggressively, all the rest are candidates. It is a question of how long it takes for the penny to drop. The RECs will have to be more commercial."

Seeboard, Manweb and Scottish Hydro are among those with retail chains with tiny market shares and little prospect of challenging the larger players. Analysts are already pondering where the axe might next fall.

Most point to Powerhouse, the joint venture between Eastern, Southern and Midlands Electricity, as a candidate for store disposals, though the company declines to comment on where it sees its future.

But yesterday's deal raises as many questions as it answers, not least how the new owners of the Homepower stores plan to succeed where Yorkshire and East Midlands failed.

Clive Vlotman and Bill Colley, the PowerStore management team who have taken over Homepower, run their business from a converted pub in Elstree. Mr Vlotman believes his group has what it takes to build a national, profitable chain that can take on the big boys.

"The regional electricity companies did not develop specialist retailing skills," he said. "We intend to train staff and help them to close sales."

Mr Vlotman also plans to broaden the product offer away from the white goods to include PCs and mobile communications and invest in an integrated computer system.