Kesa sales fall worsens on euro crisis, Darty drop

LONDON (Reuters) - Kesa KESA.L, Europe's No. 3 electrical retailer, said sales declines worsened in its fourth quarter as consumers fretted about fallout from the euro zone debt crisis and its core French business came up against tough digital switchover comparisons.

Shares in the group fell 8 percent on Thursday after it said sales at stores open over a year fell 5.9 percent in the 16 weeks to April 30 period, which includes its fiscal fourth quarter, and gross margin declined 100 basis points.

That compares with analysts' consensus estimate for a 5.3 percent like-for-like sales fall and a decline of 1.3 percent in the 10 weeks to January 8.

Kesa said the group would, however, make an underlying pretax profit for 2011/12 around the mid-point of an analysts' range of 53-64 million euros ($68-$82 million).

"Trading conditions have been volatile and have remained weak in most of our markets, particularly in vision (TVs) and in Italy and Spain," said Chief Executive Thierry Falque-Pierrotin.

Like-for-like sales at the firm's market-leading Darty France stores open over a year slumped 10.0 percent, having been down 4.7 percent in the third quarter.

Falque-Pierrotin told reporters the double-digit decline was "a one-off", reflecting an over 30 percent slump in television sales against a spike in demand last year when the greater Paris region switched off analogue broadcasts, requiring consumers with older sets to buy new digital ones.

He pointed out that sales of domestic appliances and multimedia products, such as tablets and laptops, were positive but said it was too early to tell if the pledge of France's new Socialist president, Francois Hollande, to push economic growth over austerity will spur an improvement in consumer sentiment.

Electrical specialists such as Kesa and Europe's No. 1 and 2, MediaMarkt Saturn (MEOG.DE) and Dixons Retail (DXNS.L), are battling cut price competition from supermarket chains and internet retailers at a time when European consumers are cutting spending in the face of rising prices, weak wages growth, rising unemployment, government austerity measures and fallout from the euro zone debt crisis.

Prior to Thursday's update shares in Kesa, which sold the loss-making British business Comet to private investment firm OpCapita for a nominal 2 pounds in February, had lost 60 percent of their value over the last year.

The stock was down 4.2 pence at 49.8 pence at 0956 GMT, valuing the business at about 273 million pounds ($435 million).

"Management has made no comments that suggest there are signs of improvement in trading," said Espirito Santo Investment Bank analyst Richard Cathcart, who was also alarmed by a forecast for year-end net debt of about 130 million euros.

"For a business that used to report net cash, we see this as a particularly negative development."

Like-for-like sales rose 6.2 percent at Kesa's established businesses in the Netherlands, Belgium, the Czech Republic and Slovakia and rose 0.8 percent at its developing businesses in Spain, Italy and Turkey.

Last week Kesa sold Darty Telecom to Bouygues Telecom, raising 40 million euros.

($1 = 0.7849 euros)

($1 = 0.6282 British pounds)

(Reporting by James Davey; Editing by Mike Nesbit and Hans-Juergen Peters)