AU revoir Britain, vive la France – that seems to be the prevailing view at Kesa, where management has asked bankers to put Comet, the underperforming British chain, on the block. That will allow Kesa to concentrate on the more profitable French business Darty, or so the theory goes.
There is no doubt that Knight Vincke, the activist investor that has built an 18 per cent stake in the retailer, is forcing this strategy. Back in January, chief executive Thierry Falque-Pierrotin scotched suggestions it should sell off Comet and said he would “keep working” on a plan to refurbish the UK stores.
While it is true that the French business is healthier, we don’t think that breaking up the group is a panacea. True, like-for-like sales in France actually grew five per cent in the 12 weeks to the end of April, compared to the bloodbath at Comet, where sales plunged 15.2 per cent. But the disparity was due to a variety of one-off factors, including the VAT hike in Britain and the digital switchover in Paris, where customers rushed to buy the right kit before the analogue signal was turned off.
Kesa’s other divisions are hardly doing a roaring trade either. Sales growth in the division that houses its Dutch and Belgian chains is anaemic, while the Spanish and Portuguese business is performing abysmally.
The outlook for electricals retailers in the Kesa / Dixons mould is impossibly bleak. Online-only rivals can beat them on choice and price; quality resellers like John Lewis are better at giving advice; and supermarkets are more convenient.
There may be some profits to be had in buying Kesa ahead of a Comet spin-off, but we think the group is still facing terminal decline – with or without its British shops.