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By | Paul Kunert 1st November 2012 10:14

Ailing Comet at last prayers: Cawing of accountants and VCs fills air

Suppliers wouldn't fill warehouse for Xmas on tick

Beleaguered bricks and mortar retailer Comet is lurching toward administration with Deloite understood to be waiting in the wings.

Parent Kesa Electricals offloaded Comet to OpCapita in November 2011 for a nominal fee of £2 but it was forced to hand over a £63m dowry for working capital purposes and retain the pension scheme.

The venture capitalist brought on board former Dixons honcho John Clare as chairman to stabilise things and was forced to slash jobs as part of efforts to reduce overheads.

Clare noted back in February that the first task was to convince trade credit insurers to "reinstate" lines of cover so that suppliers could trade with a safety net should Comet go down. This didn't happen.

Sources told the FT that Comet was hit by liquidity woes as it tried to fill the warehouse ahead of the peak Christmas period, as suppliers were dealing on a cash with order basis.

Recent talk in VC circles had it that several private equity firms were circling Comet and this made suppliers more nervous. It's potentially more likely that parts of the business may be sold.

The troubles at Comet and other traditional consumer electronics retailers can be traced back to the origins of the Internet when low cost online rivals undercut them to snaffle their sales.

It has been slow death by a thousand cuts - bricks and mortar retailers have not responded to the incursion, research from Canalys has stated.

Vendors including Apple and increasingly Microsoft are taking more control over customers' retailing experience by opening their own stores - the fruitchomp vendor turned over $4.2bn in stores in Q4.

Casualties on the High Street have been mounting with Best Buy pulling out of Europe, Game going into administration to be bought by new Comet parent OpCapita and Dixons closing stores.

Comet employs around 7,000 people across 240 stores the UK, who will be under threat of redundancy should administrators get the nod as expected at some point today. ®

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