Kesa dumps money-losing UK Comet stores

AP News
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Posted: Nov 09, 2011 4:58 AM
Kesa dumps money-losing UK Comet stores

Kesa Electricals says it has agreed to sell its money-losing Comet stores in Britain for a token payment of 2 pounds ($3.22).

Kesa said Wednesday that it would also invest 50 million pounds in the buyers, Hailey Holdings Ltd. and Hailey Acquisitions Ltd., and would retain liability for Comet's defined benefit pension plan, which has a deficit of euro46 million ($63 million).

Kesa shares were up 1 percent at 102.8 pence in midmorning trading on the London Stock Exchange.

"Clearly, the board has decided that sustaining Comet's losses into an uncertain future is the wrong thing to do and it is difficult to disagree with them," said Philip Dorgan, analyst at Panmure Gordon.

He downgraded Kesa from "hold" to "sell," calculating that the shares were worth only 80 pence because of wider problems in the group.

Comet, which operates 249 stores in the United Kingdom, is the second group of stores this week to fall victim to poor sales in the store-based electricals sector. Carphone Warehouse announced on Monday that it was shutting all 11 of its British Best Buy stores, which had been planned as the start of a nationwide chain.

Kesa said Comet's sales were down 18 percent between May and the end of October.

The company said group revenue in that period fell by 6.2 percent on a local currency basis.

Revenue in Darty France declined by 2.4 percent, while the BCC, Vanden Borre and Datar businesses combined for a revenue increase of 0.7 percent.

Developing businesses of Darty Italy, Darty Turkey and Darty Spain posted a 5.2 percent increase in revenue, though expansion masked an 8 percent drop in revenue comparing stores open for at least a year.