Escom UK seeks a buyer

Escom UK, the British subsidiary of the troubled German computer retail chain, is in talks to find a buyer after its parent filed for creditor protection earlier last week.

Escom AG has said it will divest itself of "non-core" businesses and sack 1,400 employees across Europe in a bid to stem mounting losses at the group. Much of these came from over-ambitious expansion, including in the UK, where the group took over the Rumbelows chain of 230 electrical stores from Thorn-EMI last year.

Geoffrey Saunders, commercial director of Escom UK, said: "We are in talks with a number of interested parties. A management buy-out is also a distinct possibility. We remain very bullish on the future." However, senior industry sources believe Escom UK will be hard pressed to gain a well-to-do suitor.

One retailer commented: "The Escom formula is very hard to justify. Small shops, selling its own brand with poor consumer awareness in a highly competitive market, make it a difficult proposition to justify."

Escom has concentrated on multimedia home PC sales, and accessories; much of its problems stemmed from overstocking across Europe. In particular, it failed to forecast accurately the all-important Christmas period, projecting growth as high as 50 per cent.

Separately, the German authorities have launched an investigation into possible insider trading in Escom shares, ahead of the recent announcement, and the suspension of the shares.

Escom has had to revise its 1995 losses, which were first thought to be DM125m (pounds 52.6m) but were disclosed on Wednesday to be DM180m.

Sales growth of 20 per cent in the UK had forced the company to make huge stock write-downs. Lower than anticipated sales of home PCs have caught out several computer manufacturers recently. Digital Equipment, NEC and Apple have all seen sales slow, especially in Europe.

However, Mr Saunders says the surplus stock from the closures of its third-tier stores could boost sales at the remaining stores in the UK.

On Wednesday, Dixons, the consumer electronics retailer, and one of the biggest PC retailers, is expected to report profits up from pounds 100m last year, to between pounds 128m and pounds 138m.