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Kesa slides as its keeps loss making Comet for now

A slump in sales and the failure to sell its Comet business has sent shares in Kesa Electricals sliding.

In June the company said it was looking at a number of options for it loss making UK chain, including putting it up for sale. The move came following pressure from Knight Vinke, the activist investor which owns 20% of Kesa. But despite interest from private equity groups, no deal has yet been agreed, with Comet’s pension position thought to be one stumbling block.

Of course Kesa has not exactly made all this clear in its trading update. It merely said:

Comet turnaround plan [is] underway while continuing to examine other strategic alternatives.

And does it need turning round. Total Kesa sales fell 9.9% but Comet was down 22%, while even its better performing Darty business in France was down 3.7%.

The news sent Kesa shares down 1.65p to 85.5p. Investec analyst David Jeary said his hold recommendation was under review:

Uncertainty over the future of Comet and fears of weakening sales in the core French market, in addition to known weakness in Italy and Spain, have resulted in substantial share price weakness over the past two months. Forecasts are likely to fall, in our view, even from our low end forecasts.

Philip Dorgan at Panmure Gordon said:

This is a genuinely poor performance at Comet and in developing countries, which together potentially create a real hole in group profits. Having initiated with a hold in July, this was clearly way too optimistic and we kick ourselves for missing an opportunity. While we console ourselves with the fact that both our forecasts and our recommendation have been in line with consensus, this is cold comfort.

Today, we are downgrading our next three years’ forecasts by 9%, 20% and 30% respectively and our target price from 150p to 80p, to reflect the likelihood that loss-making countries will lose more, for longer, than we had previously thought.

On a busy day for retailers, B&Q owner Kingfisher has pleased the market with a better than expected 24% jump in half year profits and news of the creation of 1,200 jobs. It shares are topping the FTSE 100, up 14.4p at 254p.

Meanwhile homewares retailer Dunelm rose 27p to 454.1p after a 9% rise in full year profits to £83.6m.

Official retail sales figures are also out, showing a 0.2% fall in August, better than the expected 0.3% decline expected by analysts, despite the effect of the riots. James Knightley at ING Bank said:

The office of national statistics states it couldn’t quantify the effects of the riots on retail sales with some stores benefiting and others losing out. That said, the only components seeing a rise were textile/clothing and non-store/repair. The weakest component was motor fuel given the declines in petrol prices. Stripping out fuel then sales fell a more modest 0.1%. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds