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Larger losses expected at Comet as MD departs

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Larger than predicted losses are expected to be announced at UK electricals retailer Comet when parent company Kesa Electricals announces its pre-close trading statement next Wednesday, according to analysts.

In January Kesa estimated operations in the UK would record a “small” loss for the year ending April, but the departure of Comet Managing Director (MD) Hugh Harvey on Tuesday has increased speculation that the retailer’s performance has worsened.

Nick Bubb, Retail Analyst at Arden Partners, said: “The current consensus, post Dixons’ recent profit warning, is for a retail loss for Comet of about £10 million, which is not that small.

“And we suspect it will be even bigger than that, assuming a weak end to April, as we have a loss of at least £12 million now pencilled in - rising to £19 million in the new-year.”

Jamie Talmage, retail analyst at accountancy firm BDO, also expects Comet to record “disappointing results”, despite Kesa’s overall group performance being strong thanks to encouraging sales levels from French operation Darty.

“The UK’s electricals retailers have too much physical space and people are buying fewer big ticket items due to the tough economic backdrop,” he stated.

Talmage also suggested that Kesa may look to downsize its UK store portfolio in the months ahead, but “offloading Comet would be a logical thing to do”.

It appears that new MD Bob Darke, who was previously Comet’s Commercial Director and is described as “the obvious internal Harvey replacement” by Bubb, has a challenging job in getting the electricals specialist back on track.

Whether Harvey jumped or was pushed from his role as Comet boss is a question that remains open for debate, but one thing for sure is that Kesa will want to stop sales sliding at its UK retail arm.

Comet like-for-like sales slipped 7.3 per cent year-on-year over Christmas, and in December’s half-year trading update it reported losses of €6.4 million (£5.75 million), compared to losses of €1.8 million one year before.

Bubb said: “How to stop the slide at Comet is a conundrum exercising the minds of Kesa’s management, just as it is taxing the patience of activist shareholder Knight Vinke.”

Published on Thursday 05 May by Editorial Assistant

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