John Clare, the veteran electrical retailer who became chairman of Comet on Friday, said he would take the struggling chain back to its 1980s roots, believing that low prices hold the key to success for its new private equity owners.
OpCapita officially took ownership of Comet on Friday, three months after agreeing to buy the 249-store UK chain for just £2 from listed retailer Kesa, which provided a dowry of £50m to rid itself of the lossmaking business.
The former boss of rival retailer Dixons, Mr Clare has hit back at the chain’s detractors, stating he is “convinced that Comet can be turned around” under new management, without recourse to radical restructuring or store closures.
His optimism has been greeted with surprise by retail analysts, who forecast operational losses of £35m on Comet’s expected £1.3bn turnover for the financial year to April 30, after it experienced a sales drop double the size of high street peers Dixons and Argos over the peak Christmas period.
Uncertainty about the chain’s future has resulted in trade credit insurers placing insurance cover for Comet’s suppliers under review, and one of Mr Clare’s first tasks will be convincing them to reinstate it.
“They all want to see more details of our business plan, but our conversations have been very straightforward, commercial and transparent,” he said. Accepting that some suppliers will not trade without insurance, he added: “The majority of our suppliers have agreed to continue, and we’re very conformable with where we’ve got to.”
Mr Clare points out that around £25m of Comet’s anticipated losses can be put down to depreciation charged on the cost of previous store revamps, stating: “It’s our objective to get it back to an ebitda [earnings before interest, tax, depreciation and amortisation] profit as soon as possible.”
“The opportunity is for Comet to get back to its core proposition,” he said. “I’ve known this business since the 1980s, and giving value to customers is what’s embedded in its roots.”
However, analysts believe the internet should be the number one priority. “Online and the convenience of click and collect are the fastest growing areas of electrical retailing,” said Adam Cochrane, retail analyst at UBS. “Customers want to order more cheaply and get delivery quicker. Making people choose your internet site will be the key battleground going forwards.”
Stiff pricing competition from rival electrical retailers and online competitors led Kesa to reposition Comet to capture the John Lewis shopper – describing the process as “Dartification” after Darty, its successful, service-orientated French chain. In Mr Clare’s view, while French consumers might be prepared to pay high prices for Darty’s brand heritage, UK shoppers are not.
He intends to outsource Comet’s in-house repair and home delivery operations to cut costs, stating: “These services can be performed more competently by others, whose core competency it is.”
This could also boost profit margins, which are notoriously low on items such as Apple iPads. As the mark up on accessories can be 60 per cent or more, Mr Clare added that generating “add-on” sales in store was key.
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