Kesa under pressure amid glommy outlook

Shares in Comet owner Kesa Electricals were deep in the red today after gloom settled over its future trading prospects.

Kesa said Comet posted a 0.4% rise in like-for-like sales during the three months to April 30, with a 5.6% rise for its French retailing arm Darty.

But the group also made a £4.7m (€5.9m) operating loss during the period, while chief executive Jean-Noel Labroue warned of falling consumer confidence and “further difficult trading conditions”.

Shares fell 10% after a number of brokers downgraded their earnings forecasts and questioned the group’s trading outlook.

Philip Dorgan, a retail analyst at Panmure Gordon stockbrokers, shifted the stock on to a sell recommendation, forecasting group profits will decline this year and next.

He said: “Kesa is certainly not a growth business. Neither Comet nor Kesa has shown any growth in sales per square foot over the last five years.”

Nick Coulter of Numis Securities said he was moving to a “negative stance” on the group despite Kesa’s £128.8m (€162.5m) of pre-tax profits for the year to April 30, which were in line with market forecasts.

“The electricals market continues to be extremely difficult,” he said, citing a proliferation of free laptop deals in the sector.

Mr Coulter added: “Despite upbeat noises on consumer demand, Kesa notes that it is seeing a continuing decline in consumer confidence. Crucially, we note the recent weak consumer spending data coming out of France, which accounts for three quarters of Kesa’s (underlying) earnings.”

He also raised looming UK market entrance of giant US electricals chain Best Buy, which last month unveiled a joint venture with Carphone Warehouse.

Shares in Kesa’s UK rival, Currys owner DSG International were also down 10% today.

Kesa said continued demand for laptops and flat screen televisions helped shore up sales growth at Comet during the year to April 30.

The chain, which has 251 stores, posted a 0.3% rise in like-for-like sales in the year to April 30, compared with 0.4% growth in the year to January 31. Sales of white goods like fridges, freezers and washing machines eased during the period, it said.

Comet benefited from it “click and collect” initiative, which enables customers to order on-line and pick up their goods in-store. Web sales grew 30% during the year, compared with a 23% rise in the 12 months to January.

Mr Labroue said of the results: “The group delivered solid revenue and profit growth in overall positive market conditions, although these weakened over the last six months of the period. We are seeing a continuing decline in consumer confidence and we anticipate further difficult trading conditions ahead.”

Retail profits at Darty, which comprises 214 stores, rose 2.8% to £111.5m (€140.7m) during the year to April 30. Revenues were 13.5% ahead at £1.99bn (€2.5bn). Results from the continent were helped by a stronger euro during the period.

The group said the €550m proceeds from the sale earlier this year of French furniture retailer BUT had been used to reduce borrowings.

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Wesley O’ Regan is the General Manager of Popscene in Voodoo Rooms, Cork city. Popscene opened last November and is Cork’s only themed bar that is dedicated to celebrating the best of the 80s and 90s.'ve Been Served: Wesley O'Regan, Popscene

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