Kesa considers putting Comet up for sale as losses hit £9m

Comet owner Kesa Electricals is eyeing a sale of the loss-making electrical goods chain after hard-pressed shoppers turned their backs on big-ticket items.

The company is studying options for Comet, including selling the business or forming a joint venture to run it. Comet has 10,000 staff and 249 shops, of which 29 are in Scotland.

Comet slumped to a loss of 8.9 million in the year to 30 April, which Kesa chairman David Newlands described as "unsatisfactory and unacceptable".

Trading since the end of April was tough and weaker than the group's bosses expected.

Sales of televisions proved particularly poor against a strong performance during the same period last year ahead of football's World Cup.

The company said it had received interest in Comet from potential buyers, although it declined to give details.

It has also launched an overhaul of the chain, including selling more smaller appliances such as kettles, toasters and Apple iPods, closing or selling 17 under-performing shops, reducing the size of nine and refurbishing seven.

Newlands said: "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."

Group profit before tax and one-off items in the year to 30 April rose 2 per cent to €93.2m (83m) in 2010-11, just ahead of the average market forecast, although estimates were reduced after a profit warning in January.

The group said it had improved the results of Darty France and was taking steps to do the same at its other businesses. Chief executive Thierry Falque-Pierrotin said: "We anticipate all our markets will be challenging for the current financial year, particularly in the first half against the World Cup comparatives of last year. We are well prepared for these conditions."

Kesa shares jumped nearly a tenth to 134p on hopes that the firm may offload the chain. Kesa has also attracted talk of a bid for the whole group, with private equity firms such as PAI Partners mentioned as potentially interested in breaking up the company themselves.

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 hits its profit margins.Brokers questioned whether Kesa would find a buyer for Comet in a market where it and rivals such as Dixons and Best Buy face competition from grocers and the internet, and where consumers are shunning discretionary purchases as household budgets are squeezed.

Nick Bubb of Arden Partners said: "It is entirely possible things could get worse, not least as interest rates haven't gone up yet."

Seymour Pierce said it was likely to reduce its profit forecast for 2011-12 of €100.9m in the light of Kesa's downbeat comments about trading. However, broker Freddie George said: "We do expect the shares to be supported by continued takeover/restructuring talk."

Singer Capital Markets expected 2011-12 profit forecasts to be cut by about 5 per cent, but Newlands said Kesa was comfortable with existing forecasts of about €106m.