Darty Plans to Scale Back in Unprofitable European Markets

Darty Plc (DRTY), the owner of France’s biggest consumer-electronics retailer, said it may scale back unprofitable European businesses amid pressure from its largest shareholder.

The owner of the BCC, Vanden Borre and Datart chains said today that it plans to “eliminate the losses in our non-core markets of Italy, Spain, the Czech Republic and Slovakia.” The company announced a deal to sell its unprofitable Italian unit last month and that’s “the kind of option we’re looking at,” Chairman Alan Parker said on a conference call with reporters.

The plan has the backing of Knight Vinke, Darty’s largest investor with a 25 percent stake, meeting one of eight demands made by the activist investor, according to a person familiar with the company, who asked not to be identified because the matter is private. Most of Knight Vinke’s requests have now been met, according to the person, including the appointment of a new adviser, Goldman Sachs Group Inc., and an intention to appoint a new chief executive officer by April.

Darty said in September that CEO Thierry Falque-Pierrotin would step down after almost four years at the helm.

The retailer’s likely exit from the three countries is “encouraging news,” said Freddie George, an analyst at Seymour Pierce with a hold recommendation on the shares.

Darty rose 12 percent to 53 pence in London trading, the most since Nov. 21.

500 Stores

The company has almost 500 stores in nine countries across Europe, where the sovereign-debt crisis has sapped consumer confidence and spending. Darty said it plans to focus on France, Belgium and the Netherlands. Its business in Turkey will remain “under review,” the London-based retailer said.

Also today, Darty reported an adjusted loss before tax of 10.8 million euros ($14 million) for the six months ended Oct. 31. That compared with the average estimate of three analysts compiled by Bloomberg for a loss of 9.3 million euros.

“Current market conditions remain challenging and have been deteriorating in recent months,” Parker said in the statement. “Our plan will nevertheless deliver an improvement in earnings over the medium term.”

The retailer has been aligning online and store prices and adding services such as home delivery and repairs to try and compensate for a weakening market in France, its largest market.

Parker told reporters that Darty will focus on growing Web sales, improving stores with more self-service and better merchandising such as tablet computers, and marketing more strongly its value credentials as a price-competitive retailer.

“I see the Web as an opportunity, not a threat,” he said.

Darty announced a dividend of 0.875 cents a share.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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