Festive gloom surrounds sales figures from Comet owner Kesa

• Comet faces competition from Dixons Retail and Carphone Warehouse's Best Buy. Picture: PA

The group - Europe's third-biggest electricals retailer - blamed strong competition and the extreme weather for a 7.3 per cent plunge in UK like-for-like sales between 1 November and 18 January.

Comet, which runs about 250 stores, will now make a small retail loss in the year to April, while the group as a whole will return a profit at the lower end of expectations.

Kesa finance director Dominic Platt said sales trends at Comet had worsened since the hike in VAT on 4 January, and were close to a decline of around 10 per cent in the second quarter.

Retailers have been battling an uneven economic recovery, with fears that various government austerity measures and rising inflation could hit consumers hard in the months ahead.

Comet was forced into heavy discounting amid an increasingly competitive market against rivals such as Currys-owner Dixons Retail and Carphone Warehouse's Best Buy joint venture.

This left Comet's profit margins down over the Christmas period, while the chain was also hampered by a slowdown in internet sales after the introduction of a new software platform in November. Online sales rose 3 per cent, against 8 per cent in the half-year.

The festive period was also difficult for other consumer electronics retailers, with Dixons issuing a similar alert over annual profits last week following a 4 per cent drop in UK and Ireland sales.

Kesa, which also runs market leader Darty in France, has been the subject of break-up speculation amid stakebuilding by activist shareholder Knight Vinke.

Nick Bubb, a retail sector analyst at brokerage Arden Partners, said: "Knight Vinke, with an 11 per cent stake, will not be pleased.

"The statement that UK trading has softened since the VAT rise on 4 January will also spook the market about the other big-ticket retailers," Bubb added, pointing to Dixons and Argos-owner Home Retail Group.

Singer Capital Markets said Kesa's trading blow implied a profit downgrade of between 10 per cent and 15 per cent - or up to some €10 million (8.4m) - off market forecasts.The City had been expecting group profits of between €98m and €119m.

Kesa's poor performance in the UK was mirrored in its Italian, Turkish and Spanish operations, where it also trades as Darty.

These markets saw like-for-like sales drop 8.8 per cent, leaving group sales down 4 per cent despite more resilient trading at Darty France.

The pre-Christmas snow in Britain, together with adverse weather in France, the Netherlands and Belgium, knocked at least 2 per cent off sales, Kesa added.

The group also said it had signed a €455m five-year credit facility, replacing an existing €500m arrangement.