Electrical goods retailers have had a fairly tough time during the double dip recession. As well as a dip in consumer interest driven by the need of many households to cut back on luxuries such as new computers and televisions, strong competition from online retailers and supermarket chains has meant that some specialist stores have simply not been able to afford to sell goods at the low prices offered elsewhere.
Perhaps this is part of the reason that struggling chain Comet is once more back on the market only ten months after having been sold for the paltry sum of £2.
OpCapita, the private equity company that currently owns the chain of stores, is now in talks with three trade buyers after sustaining heavy losses. This is because credit insurance for the chain’s suppliers was withdrawn as a result of tightening budgets, meaning that OpCapita was forced to pay for all stock upfront before it could be delivered to any of the brand’s stores.
Without insurers to cover the goods delivered should OpCapita default on its bills, it seems that the firm has no choice but to offload the loss making company.
OpCapita purchased the struggling business from French parent company Darty, which was previously known as Kesa, for only £2, as well as receiving a dowry of £50 million in the sale. Darty also remains responsible for Comet’s pension liabilities.
Former chief executive of Dixon’s, John Clare, is said to have turned the business around in his time as chairman of Comet, with high hopes that the business will return to the black by the end of this year after clearing a substantial portion of its debts. Although the chain sustained heavy losses of £35 million in the year up to the 30th April, recent months have seen improved trading in stores nationwide.
During OpCapita’s time as owner of Comet, five of the 240 stores in the commercial property portfolio have closed as they were deemed highly unprofitable. At present, around 10,000 staff are employed by Comet nationwide – yet if the chain is taken over, there could potentially be further store closures as seen recently in sportswear business JJB Sports, meaning that employees could be faced with the challenge of finding jobs elsewhere.
None of the three interested parties have yet been named, but are believed to be a mixture of UK based and international groups. As talks are still in the early stages, no third party has been appointed as yet to negotiate the sale between OpCapita and the eventual buyer.
OpCapita has so far refused to comment on the matter, but is expected to release an official statement next week regarding the future of the Comet brand. In the original sale document signed between the private equity firm and Darty, OpCapita promised to keep the business running for a minimum of 18 months – a responsibility which will presumably be passed on to the new owner should Comet be sold in the near future.
Should the chain be sold for more than £70 million, Darty will receive a “nominal” additional payment. However, should the final sale agreement amount to less than that sum, Darty will receive no return on its £50 million investment.
Do you think long standing British chains such as Comet should receive more help when they run into financial difficulty? Will all electrical goods specialists run into similar difficulties in the future due to the strong competition from online retailers and supermarkets which are able to sell goods at a lower price, in your opinion?
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