It’s been a rough year for Kesa Electricals, the owner of high street chain Comet: the retail giant slumped to an £81.8m loss, with Comet’s profits down 76.5% in the UK. In the teeth of a nasty recession, customers are not surprisingly shying away from buying expensive electrical items like flat-screen TVs and washing machines. And unfortunately for Kesa, things don’t seem to be improving yet: the retailer’s embarked on a major cost-cutting drive in preparation for ‘another difficult year’. Clearly green shoots don’t necessarily apply to white goods.
In fairness to Comet, it did at least end the year in the black – profits were just over £10m, although like-for-like sales were down a worrying 7.7%. Kesa’s biggest problem was actually its Spanish business Menaje del Hogar – with the Spanish economy in an even worse state than ours, Kesa was forced to write down the division’s value by £118.5m. That was a major reason why last year’s £129m profit turned into an £82m loss, although obviously there are more fundamental problems for Kesa to worry about. In fact, its results would have looked even worse had it not been for the strength of the euro, which flattered its figures.
With no apparent light at the end of the tunnel, chief exec Thierry Falque-Pierrotin (who’s French, believe it or not), is on a mission to cut costs. He’s already cut 300 UK jobs, mostly at Comet’s Hertfordshire HQ, as well as closing four service centres and making some logistical changes. There was a one-off £10m restructuring cost for all this, but Kesa reckons it will save it £14m a year from here on in. This is largely why Comet ended the year in profit, although Kesa was also trumpeting the success of its plan to install a mezzanine level in 39 of its Comet stores (presumably creating more retail space for no extra property cost).
Falque-Pierrotin was putting a brave face on things today, pointing out that its other European businesses (which include the Darty chain in France) had all maintained market share and boosted profit margins. And at least the Comet that emerges after the recession will be a bit leaner and meaner. Now he just has to hope that when things start to pick up a bit, we all treat ourselves to a nice new flat-screen telly...
In today's bulletin:
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Comet finds that we don't love electricals
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The sweet sound of business success