Kesa Electricals has reported a dismal time at Comet, as expected, but its French business seems to have saved the day.
The company said full year profits would meet expectations - it warned on profits in January - but admitted total revenues fell by 3.1% in the final three months. There were market share gains for Darty in France, but continuing difficult trading conditions for Comet, in the light of the current consumer slowdown and the coalition's austerity drive. The shares have recently been supported by talk of a possible private equity bid for Kesa, up 1.5p to 138.8p.
Comet's poor UK performance has led analysts to wonder whether Dixons Retail can avoid a profit warning when it updates tomorrow. Dixons is up 0.16p at 15.96p. Nick Bubb at Arden said:
Well, even the formidable Sainsbury PR machine would be hard pressed to put a positive spin on the awful Comet current trading, but fortunately the digital TV switch-over in Paris has saved Kesa. Quite what will save Dixons from warning again on profits tomorrow is less clear.
The 15% like for like sales decline since early January at Comet is pretty disastrous, as expected, and, with gross margins over 100 basis points down, will have pushed Comet into a double-digit loss for the year. Management announced some chunky new cost savings in the UK, Spain and Holland. Given the strong balance sheet we prefer Kesa to Dixons (who report tomorrow) and we have our 125p target under review, but bid hopes look a bit overdone.
Investec was also cautious:
Comet and developing continue to act as a drag on the group's like for like performance, ensuring a weak outlook for fundamentals, despite a better than expected Darty performance. This has enabled the group to say it will deliver adjusted pretax profits in line with 'market expectations' (unhelpfully not quantified by the company), but which we believe has been eroding to around € 93m. An exceptional charge of €33m could be seen as a gauntlet for putative third party interest. We remain sellers on weak fundamentals.
