Comet goes bust in massive High Street collapse that leaves 6,500 jobs at risk and customer orders in limbo

| November 1, 2012 | 0 Comments

By
Adrian Lowery Rupert Steiner

08:50 EST, 1 November 2012


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12:11 EST, 1 November 2012

Comet called in the administrators today, leaving 6,500 jobs hanging in the balance in one of the biggest High Street collapses of recent years.

The troubled electrical chain of 240 stores, which has struggled to compete against fierce competition from the supermarkets and cut-price websites, has appointed Deloitte and will formally go into administration next week.

Comet said it was ‘urgently working’ on plans to secure the company’s future and it is expected that administrators will seek a buyer for the business – less than ten months after private equity firm OpCapita bought the chain for £2 but subsequently struggled with cashflow.

Hard landing: The electrical chain has struggled to compete against supermarkets and online firms

Hard landing: The electrical chain has struggled to compete against supermarkets and online firms

Customers with outstanding orders and those with gift cards and vouchers are being told it is ‘business as usual until further notice’ and that the group intends to fulfil deliveries of products that have been paid for.

Comet’s customer care team is handling any customer inquiries on 0844 8009595.

During October it was forced to start sale talks with buyers after the business model changed when suppliers could not find insurers willing to cover goods delivered should Comet default on its bills.

The environment for credit insurance has since become tougher and it has been withdrawn in most cases, forcing  OpCapita to pay for all its stock upfront.

COMET: A BRIEF HISTORY

Comet was founded in 1933 by George Hollingbery in Hull as Comet Battery Stores Limited – a two-man business charging batteries and accumulators for customer wireless sets.

The company moved into the radio rental business and by 1939 had 2,500 accounts.
The first Comet superstore opened in Hull in 1968 and the company was listed two years later, before being acquired by Kingfisher for £129million in 1984.

Comet then acquired Norweb Retail and increased its store portfolio to more than 250 nationwide in 1996.

It demerged from Kingfisher in 2003, with Comet and its sister electrical companies throughout Europe forming a new group known as Kesa Electricals.

As the crucial Christmas period approaches stock levels have peaked, making it harder for the firm to find the necessary cash.

The move raises the prospect of a pre-Christmas rush for discounted stock as the administrator looks to wind down supplies and raise cash for creditors.

Jon Copestake, retail analyst at the Economist Intelligence Unit, said Comet’s woes ‘come as little surprise’.

He added: ‘Not only has Comet faced deflationary pressures thanks to stiff competition and cheaper production costs, but core audio visual products are being undermined by combined platforms on smartphones and tablet computers.’

While the news was bad for the UK’s second-biggest biggest electrical retailer, its bigger rival Dixons – owner of PC World and Currys – saw shares its leap 15% as the City decided it would benefit from Comet’s demise.

The collapse is one of the biggest since the demise of Woolworths in 2008 and comes a month after the failure of JJB Sports. Other recent casualties have included Clinton Cards, Blacks Leisure, Game and Peacocks.

Comet has suffered in the mid-market, failing to compete on either price or service, and it has been unable to carve out a niche. OpCapita has invested £35m into revamping stores and Comet chairman John Clare, who was formerly chief executive of rival Dixons, is said to have stabilised the business.

The £35m investment was on top of £50m former owner Darty, previously known as Kesa, left as a dowry when it sold Comet, which has an annual turnover of £1.3bn.

Five of Comet’s 240 stores have already been closed. OpCapita is still in talks with three potential buyers. If the business is handed over to Deloitte it will look for a suitor to rescue the brand and take on any profitable stores.

During the downturn the consumer electronics business has been cut-throat.

It is dominated by John Lewis at the premium end, with Dixon’s-owned Curry’s and PC World in the mid-market and Home Retail’s Argos at the budget end, joined by supermarkets Tesco and Asda. It has already seen one casualty with the demise of America’s Best Buy, which rolled out 11 stores only to pull down the shutters earlier this year.

OpCapita is the former owner of MFI, which collapsed during the financial crisis after the equity firm sold it.

ANNUS HORRIBILIS FOR THE UK HIGH STREET

From the Press Association

The bleak news about Comet is just the latest in a series of chilling failings to come out of Britain’s retail sector this year. More than a dozen seemingly perpetual names on the high street have become casualties since the credit crunch took hold.

La Senza was an early casualty of 2012, going into administration in January

La Senza was an early casualty of 2012, going into administration in January

In January, Peacocks, which had 563 stores and 48 concessions, and parent company the Peacock Group, collapsed under a debt mountain in the biggest retail failure since Woolworths, placing 7,500 jobs in jeopardy.

The children’s clothing chain Pumpkin Patch went into administration with 400 jobs put at risk – 60 employees had already been made redundant and five of Pumpkin Patch’s 36 UK stores closed, but administrator Deloitte said it intended to continue trading until “strategic options” had been explored.

The month got worse with gift shop Past Times appointing administrators from KPMG to try to sell the business as a going concern. The retailer had already closed 46 stores, resulting in 507 redundancies. Lingerie chain La Senza collapsed into administration in January too, triggering 1,300 redundancies and the closure of more than 100 outlets.

It was a terrible start to the year with Barratts also calling in administrators, who said a deal had been agreed to save most of its shoe chain but at the cost of some 680 jobs. In March, administrators said almost half the stores run by collapsed retailer Game would close within a week, triggering 2,104 job losses.

Aquascutum, the 160-year-old high-end clothing company, fell into administration in April but the brand was kept alive in May after administrators sold the historic business and saved 100 jobs. April also saw nine Allied Carpets stores saved – the retailer once boasted more than 200 shops and 1,000 staff, but went bust for the third time in three years.

A month later administrators Zolfo Cooper announced the UK’s biggest specialist cards retailer, Clinton Cards, and fallen into administration with 397 of its stores sold to Ohio-based American Greetings. In June administrators Duff and Phelps were called in by department store Allders, which was established in 1862.

In July around 500 jobs were under threat after discount retailer Ethel Austin went into administration for the fourth time in as many years. And health food company Julian Graves called in administrators, putting a question mark over more than 700 jobs.

At the start of this month around 2,200 staff at JJB Sports were made redundant after administrators closed 133 stores and agreed to sell 20 remaining outlets to Mike Ashley’s Sports Direct International.

VIDEO: Comet set to call in the administrators

The comments below have not been moderated.

I’ve always had excellent customer service from Comet

Mr Patient
,

Newcastle, United Kingdom,
01/11/2012 16:20

Good job Appliances Direct has product videos so you can see before you buy

Mr Patient
,

Newcastle, United Kingdom,
01/11/2012 16:18

Now where will I go to look for my electrical goods,,,, before returning home to buy them online cheaper elsewhere!!

Yorkie
,

Leeds,
01/11/2012 15:59

just had my new freezer deliverd to day from comet prompt service nice help full deivery men also bought a washing machine 3 wks ago from comet , same again prompt sevice so sorry to see them go

puggy wuggy
,

torquay, United Kingdom,
01/11/2012 15:47

what happens with your direct depts.

smicaz
,

Chorley, United Kingdom,
01/11/2012 15:44

what happens to direct depts set up.

smicaz
,

Chorley, United Kingdom,
01/11/2012 15:42

I haven’t shopped at a Comet store for years, mainly because there aren’t any near me. There was a branch near to where I used to work in the late 70’s which I used to sometimes browse during the lunch hour, it always seemed well stocked and busy. I think the heart of its problems was when it was ‘acquired’ by Kingfisher in 1984. Comet now seems to be going the same way as Woolworths, another long established company swallowed up and spat out by this conglomerate in a much weakened state.
– Lachlord, London, 1/11/2012 14:47 many years ago I worked briefly for another defunct electrical retailer, Rumbelows. I was not surprised when it closed. Often the only stock held by the store was the item on display and contrary to your example, many people didn’t want ex display products (although they could usually have them if they wanted) … store delivery day was Friday so you would tell the customer it would be in stock at the weekend, only to find it was out of stock at the warehouse…

Trevor
,

Birmingham, United Kingdom,
01/11/2012 15:37

Argos is dumping 75 stores. Others have already gone. I suggest that Comet do a really fast deal with Amazon and become the ‘High Street’ face of Amazon and sell at Internet prices through the store. Think about it! I am well aware of the economics of the High Street, but if it happens and becomes a reality, I will expect a big royalty!

– Baz, North West, United Kingdom, 1/11/2012 16:03 +++++++++++++++++ The margins on electricals are tiny and internet margins are even smaller it would be absolutely impossible to sell at internet prices and maintain the overhead that staff and buildings add to the equation .I was in the trade for decades.

someone
,

paris, France,
01/11/2012 15:25

Comet may be going, but there is no way on earth I will buy anything from Currys. I have had too many bad experiences with their “customer service”, eventually I sued them in he small claims court, and I won. I vowed then never to go back. Never had any problems at Comet. Now I will buy from Tesco or elsewhere.

Suze
,

Dubai,
01/11/2012 15:24

I thought I heard Dave announce that the recession was over………must have imagined that then!

Moneyspider
,

Medway, United Kingdom,
01/11/2012 15:22

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