Noting that both John Lewis and Dixons were outperforming the market, and with Best Buy a year into its UK launch, in my last column I suggested the next trading update from Comet was eagerly awaited.  Even at that stage Comet had admitted a ‘small retail loss’ was likely for the current year, but the real extent of its difficulties had yet to be made public.

First, at the beginning of May, after five years in the role, managing director Hugh Harvey resigned just a few days before its latest dire trading update appeared.  He was replaced by another Comet veteran Bob Darke.  Then, newspapers alleged that parent company Kesa was looking to spin off its troubled UK business.  The radical plan was said to involve a significant number of store closures, possibly through pre-pack administration.

Darke was quick to reassure staff: “There is certainly no plan whatsoever from Comet or Kesa to close large numbers of stores.  The idea that we might be going out of business is preposterous,” adding that “no decisions have been made at this stage by Kesa regarding a potential sale of Comet”. 

But with the impact of last year’s World Cup making current comparables even more uncomfortable, the flow of bad news is unlikely to end soon and analysts believe that major changes will be needed to bring the business back to profit, a target that Darke reportedly plans to achieve over the next twelve months. 

The numbers were even worse than critical observers had expected – with like-for-likes in the quarter to 30 April down by 15%.  That meant a half year down by 11%, and full year 8%.  In contrast, Darty in France saw like-for-likes increase by 5%. 

Comet is planning to consolidate fourteen regional service centres to two, reduce the warehouse network from three to two and cut head office staffing. These measures will save £10 million on an annualised basis, though an exceptional charge of £20 million will result.

Kesa’s chief executive Thierry Falque-Pierrotin noted that UK market conditions remained particularly tough and plans to reposition Comet and reduce its cost base had to be accelerated.  He expects like-for-likes to remain negative in the coming year and described the UK as the toughest market in Europe because of the intensity of competition, overspacing and the shift online.  Whilst he believes Comet is highly regarded by customers, he sees a need to ‘educate’ those who do not shop there by ‘communicating the differentiation’. 

Come and play?  Many clearly have not. 

Know how

Whilst Comet received a barrage of criticism, main rival Dixons managed to escape with some positive coverage despite delivering an 11% decline for a similar period (and seven for its second half).  The group remains profitable, its cash position has been enhanced by a £59m sale and leaseback in Sweden, and the underlying business continues to respond favourably to its much-vaunted renewal and transformation programme  

The recent relaunch of its service arm as KNOWHOW has added further interest.  Group chief executive John Browett believes the venture could add ‘tens of millions’ to profits.  Determined to take a larger slice of the £500 million added value services market, he recognises that historically Dixons had ‘missed a trick’ by not prioritizing such services earlier: “From a brand perspective we want to be famous for service and services”. 

Tough

The latest results from Argos move the picture on a further month to the end of May and gave further proof of the very tough trading conditions in consumer electronics.  In that quarter, TV sales dropped 20% and video gaming 25%, with only computers showing some growth.   Argos says it held share in March and April, the latest months for which GfK data is available.

With TVs, it has seen a move to larger screen and away from Argos’s strength in smaller screen own label as a result of much sharper pricing of branded products.  The difficult World Cup comparatives mean quarter two like-for-likes may be similarly uncomfortable.

The figures from other multiples again illustrate John Lewis’s unrelenting advance.  For the four months (to 4 June) sales of ‘electricals and home technology’ are up 2%, though that includes three new ‘at home’ stores.  Over the last six weeks sales have been marginally negative – by about 1%.