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WRAPUP 2-UK retailers Kesa, Carpetright add to gloom

Published 12/16/2008, 08:15 AM
CPRC
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* Kesa H1 profit down 71 percent; div halved

* Kesa sees "very difficult" peak trading

* Kesa shares down 9 percent

* Carpetright H1 profit down 67 percent, div down 80 percent

* Carpetright warns on FY again, shares down 15.5 percent

(Adds detail, CEO, analyst comment, updates shares)

By James Davey

LONDON, Dec 16 (Reuters) - British retailers Kesa Electricals Plc and Carpetright Plc added more misery to the sector, both posting slumps in profit, slashing dividends and warning on the outlook as even massive discounts fail to tempt consumers to part with their cash.

Both retailers highlighted the deteriorating consumer environment on Tuesday as cash-strapped shoppers, hit by sliding house prices, soaring unemployment and growing financial uncertainty rein in spending on so called "big ticket" items like washing machines, refrigerators, computers and carpets.

Their results came after a survey released on Monday said UK shopper numbers fell 9.1 percent year-on-year over the weekend.

Shares in Kesa, Europe's third largest electrical goods retailer which trades as Comet in the United Kingdom, Darty in France and Menaje del Hogar in Spain, fell 9 percent as it posted a 71 percent fall in first-half retail profit to 13 million pounds and halved its dividend. The group wrote-off the value on its balance sheet of Menaje de Hogar by 114.4 million pounds ($174.3 million) and said Spain had "the worst trading conditions in Europe."

Menaje de Hogar was acquired by Kesa for 100 million euros ($136.6 million) plus debt in September last year.

Kesa forecast "a very difficult peak trading period" and said it did not expect consumer confidence to improve for the rest of the group's financial year.

The group's first-half revenue increased 0.4 percent to 2.18 billion pounds but was down 5.5 percent on a like-for-like basis, which strips out the impact of new space.

Comet's like-for-like sales fell 11.6 percent with gross margin down 100 basis points, while Darty was down 3.8 percent with margins stable.

"Since the end of October, when we started our third quarter, we don't see any significant change in the sales pattern ... from the second quarter," Chief Executive Jean-Noel Labroue told reporters.

Before Tuesday's statement, Nick Bubb analyst at Pali International was forecasting a year to end-April 2009 pretax profit of 110 million pounds. He now reckons Kesa will be lucky to make 75 million pounds.

Prior to the results, shares in Kesa had lost 57 percent of their value over the last year, underperforming the DJ Stoxx European retail index by 39 percent.

At 1205 GMT the stock was down 9.25 pence at 92.75 pence, valuing the business at 491 million pounds.

Last month bigger rival DSG International, which trades as Currys and PC World in Britain, UniEuro in Italy and Elkjop in Nordic countries, reported a first-half loss and axed its dividend.

CARPETS NOT FLYING

Carpetright, Britain's biggest floor coverings retailer, warned its annual profit would fall well below market expectations as it reported a 67 percent fall in first-half profit and slashed its dividend by 80 percent.

Finance Director Neil Page told reporters he expected analysts' year to end-April consensus pretax profit forecast to fall to "the low 20s" millions of pounds from 32 million pounds before Tuesday's statement.

"We're not all about housing but consumer confidence, which is low, is important to us, and we hope that will come back in around 18 months," said Page.

Shares in the group, which have lost over half their value in the past year, were down 61 pence, or 15.5 percent, at 331.75 pence, valuing the business at 224 million pounds.

Carpetright, which had already lowered profit expectations twice in the past two months, posted an underlying pretax profit of 8.8 million pounds for the 26 weeks to Nov. 1 on sales 5.6 percent lower at 236.8 million pounds.

"Trading during November was below expectations and like all non-food retailers, we expect it will remain very difficult," the company said.

Sanjay Vidyarthi, analyst at Dresdner Kleinwort, reiterated his "sell" recommendation.

"Carpetright will emerge stronger from the downturn, but even the company is saying this could take another 18 months," he said. (Reporting by James Davey and Rhys Jones; Editing by Sharon Lindores and Victoria Bryan)

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