Kesa has reported strong sales growth over the past year. Like its rivals it has benefited from buoyant market conditions, but it has also begun to enjoy the rewards of store investment. The question now is whether its strategy is aggressive enough to take on Metro and DSGi in the longer term.
Electricals retail group Kesa has posted a sales increase of 9.8% to GBP4.5 billion.
Following tough trading conditions in 2005/06, Kesa enjoyed a strong performance in 2006/07, boosted largely by demand for flat-panel TV and other new technology across western Europe. Sales increased by 9.8% to GBP4.5 billion and profits increased 9.7% to GBP180.9 million.
During the year, Darty France, Kesa’s largest fascia, saw sales increase by 9.0% to E2.5 billion including an impressive like-for-like uplift of 7.8%. As in the wider market, TV was the key catalyst, although strong demand for laptops and a long awaited recovery of white goods were also reported.
BUT, which has struggled in recent years, showed improvement over the year with sales ahead by 3.5% to E876.4 million and profits up 6.0% to E53.1 million. Comet also enjoyed a strong year’s trading, with sales up by 9.6% to GBP1.7 billion and retail profits improving by 20.4% to GBP46.1 million.
Elsewhere, Kesa’s other businesses outperformed, delivering combined growth of 25.9% in local currency to E727.9 million, and retail profits nigh on doubled, up by 97.6% in local currency to E16.2 million.
Looking ahead, Kesa has reasons to be optimistic over the next couple years. The European electricals market is, this year, set for another bumper performance, and Kesa’s investment in store environments across its main brands will enhance its competitive position in existing markets. It also has revenues from its recently launched Darty Box service to look forward to, as well as new initiatives such as Comet On Call – its new UK installation service.
Problems for Kesa are likely to lay further ahead – that is unless it ramps up its space development. While Kesa has excelled in terms of investment in existing stores, the aggression of its new store development plans still lag competitors’. In a quickly consolidating European electricals market, where scale is becoming an imperative, Kesa needs to be careful not to let the distance between it, as third largest player in Europe, and the two market leaders become too large.
Source: Verdict Research