High street electrical retailer Comet plunged into chaos as looming administration is putting 6,500 jobs at risk
Comet saw suppliers commandeer stock and its website crash after it was announced the reailer is going into administration.
Retailer Comet was plunged into chaos yesterday as its looming administration led to suppliers commandeering stock, its website crashing and shoppers being urged to spend vouchers soon to become worthless. Private equity firm OpCapita, which owns the 240-store business, has lined up restructuring specialist Deloitte to act as administrator.
The company said a notice of intent to file for administration had been handed in at the high court with the formal appointment of administrators expected early next week. The crunch puts 6,500 jobs at risk and raises the spectre of one of the darkest days for the high street since the collapse of Woolworths in 2008. In an email to staff, Comet chief executive Bob Darke said the board was "urgently working with its advisers to seek a solution to secure a viable future".
The 80-year-old company started as Comet Battery Stores, which charged batteries for wireless sets, and pioneered out-of-town retailing, opening its first superstore in Hull in 1968. In the first of a series of ownership changes, Comet was bought by B&Q owner Kingfisher in 1984 for £129m and, by the mid-1990s, had become a national chain. Private Equity restructuring and turnaround specialist Bonno van der Putten said “it is sad to see the demise of Comet. They were there since the early 70s”. “After the company was bought by Kingfisher in 1984”, van der Putten said, “Comet expanded the brand into one of the most familiar names on the High Street”. Van der Putten added that Comet "was an accident that was waiting to happen" and “came as little surprise” because successive senior management teams have not understood the online world. Retailers must now offer omni-channel options - shops, a website, purchases via mobile phones in an integrated business model - to be successful, Bonno van der Putten said. "Comet just continued to fail to understand the importance of this for driving business and revenue streams”.
Van der Putten says that insolvency experts at Deloitte are lined up to take over 240 stores, which hopefully will trade as normal this weekend. No redundancies have yet been announced at the head office in Rickmansworth or support centres in Clevedon in Somerset and Hull. Van der Putten thinks that Comet will honour deliveries that have been paid for but shoppers were urged to spend any gift cards or vouchers as soon as possible – "whilst stocks last".
The notice to appoint administrators gives companies exactly 5 working days to discuss a sale or other survival plans through restructuring or a turnaround or van der Putten says “as a going concern while it assesses options for sales, closures and liquidation”.
This could be extended to 10 working days but this does not usually prevent companies going into administration, van der Putten states. Comet's problems are expected to aid Dixons and Argos owner Home Retail, whose shares closed up 13.5% and 4.4%, as investors believe the rivals will pick up market share.
Comet, Britain's second-largest electrical specialist after Dixons, has struggled against supermarkets and online retailers such as Amazon and is estimated to have made a loss of £35m on sales of £1.3bn in the year to 30 April. After several years of declining results, its French parent Kesa cut the cord at the start of this year, paying turnaround firm OpCapita a £50m dowry to take on Comet for a token £2.
But without the protection of its large listed parent, which has since renamed Darty, Comet hobbled on as credit insurers refused to extend cover to suppliers. Without insurance, electrical suppliers sought payment upfront or asked for a legal claim, called "retention of title", so stock could be returned in the event of administration. On Thursday, van der Putten says, “suppliers were reported to have sent lorries to reclaim stock from Comet's distribution centre in Skelmersdale”. Spartan stocks of so-called "brown goods" such as TVs showed that some big names had stopped supplying Comet. "If you haven't got brown goods or a big range, you are always going to struggle, and some brands just didn't buy into the new arrangement."
Van der Putten does not expect a buyer for the entire business, meaning stores could be sold off to other retailers or smaller Private Equity players. Two weeks ago, Private Equity firm OpCapita said it was examining a number of potential bids for the retailer. OpCapita bought Comet last February from Kesa Electricals, which had itself struggled to turn around the business. Comet is thought to have had operational losses of about £35m last year.
OpCapita is thought to be the largest secured creditor, so will be repaid first from monies raised by the administration process.
Comet is next in line of retail casualties in 2012. The sum of current economical pressures inevitably creates winners and losers, van der Putten says. “It is indeeed that traditional retail channel distinctions are quickly melting away. Customers instead view their online and offline activities as part of an overall branded retail experience. Business intelligence and analytics will play a pivotal role in enabling a consistent, personalized and relevant experience that enhances both her experience and brands”.