Darty Full-Year Profit Slumps 66% on Discounts, Turkey Loss

Darty Plc, the owner of France’s largest consumer-electronics chain, said it expects another challenging year after reporting that annual profit slumped as it lowered prices and losses persisted in Turkey and Spain.

Adjusted pretax profit declined 66 percent to 26.4 million euros ($35 million) in the year through April, the retailer said today. That compares with the 26.7 million-euro average estimate of nine analysts compiled by Bloomberg.

Darty, whose Chief Executive Officer Regis Schultz took over in April, said the retailer needs to be “shouting more” about its low prices and plans its first store-wide sale in June. Schultz said he will improve profitability by focusing on a wider range of low-priced products, enhanced online sales with in-store click-and-collect points, and more exclusive own-brand ranges.

“The things they’ve highlighted are all pretty sensible in terms of retail, getting back to basics, getting prices competitive and using own-brand to differentiate,” said Kate Calvert, an analyst at Cantor Fitzgerald who increased her recommendation to hold from sell. “The key issue is fundamentals still remain pretty difficult, especially in France.”

Year Earlier

Darty aims to complete 50 million euros of annual cost savings a year earlier than planned by fiscal 2015. The retailer sold its Italian unit and closed its Spanish business in the past financial year to curb losses.

The shares rose 1.2 percent to 63.25 pence as of 9:41 a.m. in London. The stock has climbed 11 percent this year.

“The year ahead will be challenging and we anticipate that market conditions and product mix will continue to put pressure on margins,” Schultz said in a statement. “We aim to mitigate this through our cost-saving programs.”

Schultz said the French market leader will have its first “Sales Party at Darty” store promotion this month as a back-to-school discount effort to highlight its price competitiveness.

Service Included

“Our price credential is unique in France because it includes service,” he said.

A new Paris store in October will have staff equipped with tablets to showcase different products and services available online. The French executive also plans to add more own-brand ranges for appliances like microwaves and televisions to differentiate Darty from online rivals.

Eric Knight, the founder of Knight Vinke Asset Management LLC, which owns a 25 percent stake in Darty, exercised a right to join the board in February after the retailer reported that annual profit was set to miss expectations. Knight Vinke wants the retailer to eliminate unprofitable business and purchase shares funded by a partial sale and leaseback of property.

Chairman Alan Parker said he is delighted with the way CEO Schultz has started at the business, adding the relationship with the activist investor is “positive and cordial.”

Finance Director Dominic Platt said Darty still plans to exit its Datart unit in the Czech Republic and Slovakia, while it continues to monitor its unprofitable Turkish business, which is opening stores. A sale and leaseback of its store portfolio was investigated but was not in the “long-term interest” of the business, the retailer said today. Darty also said it plans to raise 35 million euros selling property over the next three years.

The retailer said it’s raising its final dividend to 2.625 cents a share.