Expect commercial property upheaval. This seems to be the message emanating from electrical retailer Comet, as it posts losses of nearly £9m during the past year, compared with last year’s profits of £11.5m. Total sales were £1.54bn, a 6.8% decline, and down 7.7% on a like-for-like basis. The final 16 weeks up to May 2011 saw a 15.2% drop.
A long-time fixture on UK high streets, Comet is owned by Kesa Electricals plc, the third-largest electrical group in Europe. According to reports, the parent company have confirmed that Comet is up for sale, although observers are pointing to a weakness in the UK electrical market. The retailer’s commercial property leasehold liabilities are calculated at £500m by one analyst, who foresees trading losses potentially doubling over the next year, meaning that ‘any buyer would want to be paid for taking on that risk’. A deal is therefore seen as unlikely, unless property and pension liabilities are factored in, at an estimated cost of £100–120m.
Of Comet’s 249 stores, 33 are quoted as ‘technically loss making, as their contribution did not pass Comet’s fixed cost base’, with Kesa believed to be particularly concerned about the performance of the larger stores.
Initiatives taken to revive the business include commercial property refits, dedicated areas for accessories, and a general refreshing of the brand. One of its three warehouses will be closed, along with twelve of fourteen regional centres, used by engineers to service and repair products. Seventeen Comet stores are described as up for sale or candidates for closure, as part of a ‘strong turnaround plan for Comet’. It hopes to sell leases in locations including Manchester and Edinburgh. Other reports expect a reduction in the Comet commercial property portfolio to occur at a rate of five to ten properties per year, as leases expire.
