Kesa H1 earnings fall sharply

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By Trevor Datson

LONDON (Reuters) - Kesa Electricals Plc , Europe’s third-biggest electrical retailer, said on Wednesday its first-half retail profits fell 27 percent and ruled out a market upturn in France and the UK in the near future.

The owner of the Comet chain in the UK and Darty in France said retail earnings fell to 36.3 million pounds for the six months to July 31, on a 0.8 percent drop in like-for-like sales.

"Trading across our core markets since the end of July has not improved. In view of the continuing decline in consumer confidence across all our markets, we do not anticipate any changes to these conditions in the immediate future," the company said in a statement.

But although same-store sales were unlikely to improve in the second half Chief Executive Jean-Noel Labroue told a conference call he was happy with the current market consensus forecast for a year pretax profit of about 172 million pounds.

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"We’re not seeing any improvement anywhere, the first weeks of trading (since the end of the half) are consistent with the first half. But we don’t see any worsening of the trend," Labroue said.

Pretax profit for the period, reported for the first time under IFRS accounting standards, fell 38 percent to 23.1 million pounds. The company set an interim dividend of 2.95 pence per share, a 7.3 percent rise on the year-ago period as operating cashflow remained strong at 58.6 million pounds.

All businesses except the French BUT furniture chain showed a decline in retail profits, with the largest unit Darty showing a 4.8 percent decline in profits to 35.8 million despite a sales upturn of 5.6 percent.

In common with rivals Darty has seen margins eroded through price deflation as big-ticket items like flat-screen televisions and DVD players plummet in price.

Earnings at Britain’s Comet, the other main business area, turned to a 3.3 million-pound loss as sales dropped 2.2 percent, sparked by a decline in the white goods market.

Kesa shares closed at 259-3/4 pence on Tuesday, valuing the company at 1.375 billion pounds.

Retailers across Britain are struggling as debt-laden shoppers curb spending after interest rate hikes and amid stagnating house prices. French consumers are also tightening purse strings amid stubbornly high unemployment.

Kesa and rivals like DSG International -- formerly Dixons -- have been particularly hard hit as discretionary spending on items like washing machines, televisions and hi-fi equipment is normally the first to ease in times of economic uncertainty.

DSG said earlier this month it had maintained profitability levels despite a drop in underlying sales driven by cut-price competition in computers and mobile phones. DSG said group like-for-like sales fell 3 percent in the 16 weeks to August 20.

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