The nation has started buying washing machines again – at least if the latest results from electrical retailer Kesa are anything to go by. The group, which owns white goods chain Comet, hasn't had a great recession, but it's finally managed to find its way back into the black: pre-tax profits of £81.9m were 18% up on last year, and well above forecasts of around £76m. That's a decent showing in the face of stiffer competition – albeit with a lot of help from the French market. But can it sustain this, especially when VAT goes up?
Overall group sales were pretty unimpressive - up a measly 0.4%, or 1.5% if you take new stores out of the equation. Comet itself at least managed to do its bit for the bottom line, with profits rising from £10.1m last year to £11.5m this time around. But the main boost came from Kesa’s French business, Darty, which improved the overall results by outperforming the French market, seeing profits rise by 9.6%.
One reason for this slightly surprising jump in profit may be the number of World Cup fans wanting to watch the football in high definition, which has boosted all the big electrical retailers: Comet's arch-rival Currys is also expected to announce stronger-than-expected profits of up to £90m for the year to May 1, up from £50.5m last year. The event has clearly come at a good time timed for Kesa, which has suffered lately from the stiffer competition provided not only by Currys, but also by new US entrant Best Buy (already making rapid inroads into the market).
Sadly, there's no such big sporting event in 2011, which means Comet is going to have to find other ways of boosting sales to maintain this level of profit growth. Although with 25 new stores planned to open in the next year, it appears management are quietly confident.
George Osborne's announcement that VAT is to rise to 20% might not help matters, of course: an extra 2.5% on big-ticket items like televisions and fridges might put a few people off - though we imagine that if you're shelling out for a washing machine or a flat-screen HD TV, the prospect of paying a few extra quid won't necessarily put you off. And the rise won’t come into effect until January 4, which should give a slightly artificial boost to Christmas sales. Besides, the fact that Kesa has stores in 11 countries should, to use the modern political vernacular, help to spread the pain...
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