UPDATE 2-Electricals retailer Darty to close Spanish stores

Thu Apr 4, 2013 7:08am EDT

* To exit loss-making Spanish operations

* Closure of 43 stores will cost about 30 mln euros

* Shares up 12 pct

By Paul Sandle

LONDON, April 4 (Reuters) - Electrical goods retailer Darty is closing its loss-making operations in Spain as part of a turnaround plan centred on its profitable businesses in France, Belgium and the Netherlands.

The company, which trails Media-Saturn and Dixons Retail by sales in Europe, said on Thursday that its 43 stores in Spain would close in June. The closures represent less than 10 percent of Darty's total stores in Europe.

The group, which in 2012 sold its stores in Italy and in Britain, where it traded as Comet, said it had concluded that increasing the scale of its Spanish business to a level where it could become profitable would take too long and was too risky.

Shares in Darty, which has more than 450 stores in Europe, were up 12 percent to 47.8 pence by 1140 GMT, the highest in more than three weeks.

Retail sales in Spain have fallen year-on-year for 32 straight months to February, as high unemployment, wide-ranging austerity measures and five years of tumbling property prices battered consumer sentiment.

A 3 percentage point increase in value-added tax last September further dampened domestic demand, especially for large purchases such as washing machines and refrigerators.

Rival Dixons closed all of its 34 PC City stores in Spain in 2011.

Darty warned in February that if trading did not improve across all of its operations, underlying pretax profit would fall short of 30 million euros, which was the low end of analyst expectations at the time.

Activist investor Knight Vinke, which obtained a place on Darty's board earlier in the year, has also been pushing the company to accelerate the pace of change, including eliminating loss-making businesses.

Analysts at N+1 Singer said it was a sorry end to a saga that started when previous management acquired a chain of stores in Spain shortly before the financial crisis at a reasonably full price.

Including the cost of closing the shops, which Darty put at about 30 million euros ($38.5 million), the analysts estimated that the company had burnt through 300 million euros in the country.

"We regard the decision to close it down as long overdue," they said.

The stores in Spain were expected to record a retail loss for the year to 30 April 2013 of about 16 million euros on revenue of about 120 million euros, the company said.

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