Comet sold for £2

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Electrical retailer Comet, which has been going through a major restructuring of its supply chain, is to be sold  to private equity investors for £2.

Comet has been struggling to restore profitability and earlier this year set out restructuring plans designed to save £10m a year.

This involved closure of its Corby distribution centre reducing the warehouse network from three to two, and consolidation its 14 regional service centres to two sites.

In addition, it extended its contract with Wincanton to take over its entire distribution operation.

David Newlands chairman of parent company Kesa Electricals, said the sale of the Comet business would deliver a more certain outcome than continuing with the turnaround plan.

“While good progress has been made against the turnaround plan’s strategic objectives, in reaching its view the board took into account: the ongoing negative impact of Comet on the financial position of the group; the significant challenge involved in achieving an acceptable level of profitability at Comet over the long term given the specific competitive nature of the UK market; and the substantial costs involved if the turnaround plan proved to be unsuccessful.”

Under the agreement, Hailey Holdings and Hailey Acquisitions will pay £2 for Comet and Kesa will invest £50m in Hailey 2 LP, the shareholder of the purchasers.

In its first half results, Kesa said that Comet had completed the planned service centre and logistics consolidation as well as a store relay programme ahead of peak season.

“These actions however had a short-term impact on Comet’s revenue, which fell by 17.9 per cent in local currency and by 18.6 per cent on a like-for-like basis. The focus on arresting margin loss together with the continued relative outperformance of higher margin product categories contributed to an improvement in gross margin of 70 basis points for the period.”

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