Kesa is reported to be considering the sale of its loss-making British chain Comet after trade across the group worsened in its new financial year.
Chairman David Newlands told reporters on Wednesday the company was looking at a range of options for Comet, including a sale or formation of a joint venture, while pressing ahead with a turnaround plan which includes selling weaker shops and focusing on profitable ranges like small appliances.
Comet, which trades from about 250 stores and employs some 10,000 people, slumped to a loss of £8.9 million in the year to April 30, results which Newlands described as “unsatisfactory and unacceptable”.
“We now have a strong turnaround plan in place and the board decided it was the right time to benchmark that plan against the external alternatives,” he said.
Kesa shares jumped as much as 8% to 146.2 pence on hopes the firm would finally find a solution for the chain.
However, some analysts questioned whether a buyer would come forward in a market where specialists like Kesa, Dixons and Best Buy face cut-price competition from grocers and the Internet, and where consumers are cutting back on discretionary purchases as household budgets are squeezed.
“It is entirely possible that things could get worse, not least as interest rates haven’t gone up yet,” said Arden Partners analyst Nick Bubb.
Best Buy and partner Carphone Warehouse last week delayed a decision on the future of their fledgling UK megastore business, which some analysts took as a sign they are waiting to see what happens with Comet and could make a bid.
Ridding itself of Comet has been suggested by analysts as an ambition of Kesa’s 18% shareholder Knight Vinke. Losing Comet could enable Kesa to focus on its successful Darty business in France, switch its listing from London to Paris and get its shares re-rated, but it would also reduce the group’s buying scale, which could impact profit margins.
Kesa has also attracted talk of a bid for the whole group, with private equity firms like PAI Partners mentioned as potentially interested in breaking up the company themselves. PAI Partners has declined to comment on such speculation.
Kesa said trading since the end of April had been tough and weaker than internal expectations, with sales of televisions proving particularly poor against a strong performance during the same period last year ahead of the 2010 soccer World Cup.
However, Newlands said Kesa was comfortable with the existing consensus forecast, which analysts said was about 106 million euros.
Profit before tax and one-off items rose 2 percent to 93.2 million euros in 2010-11, just ahead of analysts’ average forecast, although estimates were reduced after a profit warning in January.
Dixons, Europe’s second biggest electricals retailer behind German group Metro’s Media-Markt/Saturn business, will post 2010-11 results on Thursday and they are widely expected not to make for good reading.