John Clare, a former Dixons chief executive, has met with the Comet’s key suppliers in recent days, after trade credit insurers placed their coverage of Comet “under review” after the announcement that parent company Kesa planned to sell the business to the private equity firm OpCapita.
Mr Clare, who ran rival electrical retailer Dixons Retail for over 15 years, is expected to be appointed chairman of Comet when the sale to OpCapita completes. The new position will see him go head-to-head with his former employer.
Speaking publicly for the first time since it was announced that he was to chair Comet, Mr Clare set out how he plans to turn around the troubled retailer.
“I can see a real opportunity. This is not about doing a pre-pack or closing stores,” he said. “This is about focusing on margin improvement, cost structure and cash management”.
Although a non-executive chairman it is understood that Mr Clare intends to spend at least three of four days a week in the business until it is back on track.
Observers expect Mr Clare to refocus Comet on its value proposition and to cut “back office” costs by, for example, outsourcing its repair and delivery divisions.
Credit insurers protect suppliers against the risk of a retailer defaulting. Questions were raised about the transparency of the industry after Woolworths and Zavvi collapsed following the withdrawal of trade insurance.
“The trade insurance situation is frustrating, but suppliers have been very supportive. We have put in place appropriate arrangements,” said Mr Clare.
Mr Clare has told suppliers that the review by a number of trade insurers, will have no affect on the business in the short term, with Comet having plenty of liquidity.
Comet hopes to resecure trade cover when it presents a revised business plan to the credit insurers at the end of the month.
There is no news on what Comet are to do with their existing service and logistics operations at this time although we expect to hear something in the next week.
The Financial Times reports that Mr Clare states he is “convinced that Comet can be turned around” under new management, without recourse to radical restructuring or store closures.
This opinion appears to have surprised analysts according to the FT, who forecast operational losses of £35m on for the financial year to April 30, after it experienced a sales drop double the size of similar high street Dixons and Argos over the Christmas period.
As we have already reported, uncertainty about Comet’s future has resulted in trade credit insurers placing insurance cover for Comet’s suppliers under review, and one of Mr Clare’s first tasks will be convincing them to reinstate it.
“They all want to see more details of our business plan, but our conversations have been very straightforward, commercial and transparent,” he said. Accepting that some suppliers will not trade without insurance, he added: “The majority of our suppliers have agreed to continue, and we’re very conformable with where we’ve got to.”
Mr Clare points out that around £25m of Comet’s anticipated losses can be put down to depreciation charged on the cost of previous store revamps, stating: “It’s our objective to get it back to an ebitda (earnings before interest, tax, depreciation and amortisation) profit as soon as possible.”
“The opportunity is for Comet to get back to its core proposition,” he said. “I’ve known this business since the 1980s, and giving value to customers is what’s embedded in its roots.”