Kesa’s French Revenue Slides as Sales of Televisions Slump
Kesa Electricals Plc, the owner of the Darty electronics chain, said French revenue slumped in the final quarter of the fiscal year as consumers bought fewer televisions after a switchover to digital reception last year.
Sales at Darty’s French stores open at least a year fell 10 percent from Jan. 9 through April 30, Kesa said today in a statement, leading a 5.9 percent decline across the group. Annual profit will be at the “mid-point” of investor expectations, the London-based company also said.
Kesa fell as much as 8.8 percent in London trading, the steepest drop since Jan. 19. Television sales fell by more than 30 percent at Darty France as the benefit of last year’s digital switchover wasn’t repeated, Chief Executive Officer Thierry Falque-Pierrotin said. The French decline was a “one-off,” he said, adding that new President Francois Hollande may help consumer sentiment with an increase to the minimum wage and opposition to an increase in the value-added tax rate.
“Kesa is a pure play on the European consumer, and France in particular,” Freddie George, an analyst at Seymour Pierce in London, said in a note. “Unfortunately, the European financial crisis and the implementation of austerity measures across its markets means consumer demand is likely to remain weak.”
Kesa shares were down 7.5 percent at 50.05 pence as of 8:45 a.m. in London, the steepest drop in the FTSE 350 Index. That extended their decline in the past year to 67 percent.
The 5.9 percent slide in group same-store sales missed the average estimate of five analysts for a 5.3 percent fall, and was worse than the prior quarter’s 1.3 percent decline.
Kesa, which in February sold the unprofitable U.K. chain Comet, expects full-year adjusted pretax profit to be at the mid-point of a range of estimates spanning 53 million euros ($67 million) to 64 million euros, Finance Director Dominic Platt said on a call with journalists. The retailer made 93.2 million euros on that basis in the prior year.
Kesa is outperforming the market in terms of sales in both Italy and Spain, Falque-Pierrotin said, though he conceded that the company needs to reduce losses in both countries. When asked if he would consider exiting the Italian market, the CEO said he’s focusing on premium locations in the country and will provide an update on his plans in June.
Across France, sales of white-goods such as washing machines and multimedia products including Apple Inc. iPads increased, he said, though all markets are “very competitive.”
The gross profit margin weakened by about 1 percentage point in the fourth quarter compared with the same period a year earlier, which Kesa said reflected competitive market conditions and a shift in the mix of products sold.
“Gross margin trends across the group are weak,” said Philip Dorgan, an analyst at Panmure Gordon. He has a sell rating and cut his price target to 50 pence from 70 pence today.
Kesa announced earlier this month that more tie-ups could be on the agenda after it agreed to sell 99.9 percent of its telecommunications unit to Bouygues SA, France’s third-largest mobile-phone operator, for 40 million euros.
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