Kesa who expect to complete the sale of Comet to investment firm OpCapita on 3rd February, unveiled a 14.5% drop in like-for-like sales at the UK chain in the three months to January.
Kesa said that performance would leave Comet with debts £10m-£15m above the “net debt threshold” agreed with OpCapita so Kesa will have to fund this gap, in effect taking another possible £15m hit on the sale of Comet.
Analysts were reportedly stunned by disappointing sales at Darty France, seen as the main source of Kesa’s future profits.
Like-for-like trading fell 4.7%, with demand for TVs especially poor following a sales glut over the same period a year earlier as France’s digital switchover came into force. Kesa claimed the business had nonetheless outperformed the market.
Gross profit margins excluding Comet fell 0.9%, which chief executive Thierry Falque-Pierrotin put down to weak markets and a more difficult product mix.
“Against ongoing subdued consumer confidence, we are demonstrating the strength of our concept and our cross channel strategy, outperforming our markets in our continuing businesses and delivering 18% growth in web-generated sales, which now account for over 10% of product sales.
“We will keep on building on the strength of our market leading cross channel offer whilst adjusting our cost to serve, in market conditions which we expect to remain challenging .”
“In continental Europe we price match. The margin reflects the competitiveness of the market,” he said.
The debt crisis and weakening markets across Europe left few analysts upbeat about the group’s near-term future.
“Kesa is a pure play on the European consumer,” said Freddie George at Seymour Pierce. “Unfortunately, the European financial crisis and the implementation of austerity packages across its markets means consumer demand has already started to weaken.”
Despite the gloom, Mr Falque-Pierrotin struck an upbeat tone over the crisis: “I don’t think the Eurozone will explode,” he said. “[We have] a common currency with no common budgetary policies. The crisis can help build a system that will be stronger.”
However, he warned that trading was likely to remain weak in France at least until the national elections in April.
Trading across the group as a whole was more mixed, down 1.3pc on a like-for-like basis, excluding Comet.
However with uncertainty over credit insurance as we reported earlier and the current depressed market or, even a shrinking market, we are quite sure that some may well look upon Comet as being a very high risk. This may well cause the business issues in moving forward given there is generally expected to be little or no respite or relief from the fundemental causes of these factors for some time to come. Which has to beg the question, does Comet have a future at all?