Comet is consolidating warehouses, service centres, shedding jobs at HQ and setting plans in motion to close or flog a load of stores after reporting substantial losses today.
The UK arm of parent Kesa Electricals saw sales drop nearly seven per cent in constant currency to €1.8bn (£1.53bn) and posted losses of €10.3m (£8.9m) for the year ended 30 April, compared to profits of £11.5m a year earlier.
At group level, Kesa revenues went up less than one per cent to €5.9bn, net profits fell 2.9 per cent to €107m and profit before tax rose 2.3 per cent to €93m, with the Darty France stores and operations in the Benelux the brighter spots.
Decent sales of TVs spurred by the World Cup and "record trading" during the festive season at Comet, "failed to offset the earlier weakness in the market and tougher trading conditions in the final quarter, post the VAT increase," said Kesa in a statement.
"Overall Comet lost a small amount of market share in a market estimated to have been flat, particularly in large white goods against a very strong performance in the prior year."
As part of its turnaround plan, Comet slashed costs by seven per cent for the year, but this could not offset gross margin pressures caused by the sales mix of TVs and multimedia kit, price promos and the competitive environment.
"In addition to the day to day cost management, Comet is consolidating its 14 regional service centres to two sites, reducing the warehouse network from three to two as part of a re-tender of logistic services and has reduced head office headcount," it said.
This will result in a one-off charge of €20m and annual cost savings of €11m.
Kesa said Comet had two outlets that were below break even in the year and another 31 "not fully absorbing" the fixed cost base. And of those, 17 will be "closed or exited", nine will be "rightsized" and seven will be refurbished.
"The priority this year will be to close nine stores and right size seven stores. Most of the under performing stores are being marketed which could potentially speed up the overall process. There are no new stores in the pipeline."
Web generated sales grew 2.5 per cent for the period to represent 15 per cent of total product sales.
Trading conditions in fiscal 2012 are already weaker than expected, Kesa said and it forecast conditions across all its market to "remain challenging".
It has been a torrid time for most retailers in the UK, and rival Dixons Retail - today the subject of Best Buy takeover speculation - is due to file its preliminary numbers tomorrow and they are not expected to be pretty, with a drop in profits predicted. ®