UPDATE 1-Darty scores good Christmas sales in core French market

Thu Feb 6, 2014 4:20am EST

* French Q3 to Jan underlying sales up 4.9 pct vs 5.8 growth in Q2

* French Christmas, winter sales were good - CEO

* Economic climate to stay difficult amid price pressure

* Shares up over 2 percent (Adds details, CEO comments to Reuters, shares)

By Dominique Vidalon

PARIS, Feb 6 (Reuters) - Darty Plc, Europe's third-largest electricals retailer, scored robust Christmas sales growth in its core French market and plans to seek cost savings in a challenging economic climate with fierce price competition.

"We are doing an excellent quarter despite a difficult French market, confirming the performance of the previous quarter, with very nice Christmas and winter clearance sales," Chief Executive Regis Schultz told Reuters in a phone interview.

Sales at Darty France, which represents 70 percent of group revenue, rose 4.9 percent in the quarter which ended on Jan. 31, beating the domestic market, which fell 1.3 percent, Schultz said.

This compared with a sales rise of 5.8 percent in the second quarter and a decline of 0.4 percent in the first quarter.

In France, Darty made market share gains in all major product categories, notably tablets, smart phones, or small domestic appliances, but television sales volumes were still down though their rate of decline moderated.

Business benefited from VIP private shopping evenings in late November and early December, a voucher campaign on white goods after Christmas, and winter clearance sales in January.

The first day of the winter sales saw revenue up nearly one third compared to the same day a year-ago both in store and online, Schultz said.

Overall for the quarter web-generated sales grew over 10 percent to over 14 percent of total French product sales.

At group level, Darty reported a 3.2 percent rise in like-for-like revenue while overall gross margin was down 80 basis points, reflecting ongoing price pressure in "challenging and promotional markets", it said in a statement.

Darty, which has now completed its head office restructuring in France to improve cost efficiency, has a goal to deliver annual gross cost savings of 50 million euros by 2014/15, which should help limit margin pressure from price cuts.

Like its larger rivals - Metro's Media-Saturn and Dixons Retail - Darty is facing weak consumer spending and price competition from online retailers.

London-listed Darty, which has more than 400 stores in Europe, has responded by cutting costs, exiting loss-making operations in Italy and Spain, and focusing on its core markets of France, Belgium and the Netherlands.

Activist investor Knight Vinke, which owns 25 percent of Darty and has a seat on its board, has been pushing the company to accelerate the pace of change.

In December, Darty said it had agreed to sell its Turkish business under a plan to eliminate losses in non-core markets and was in talks to buy French multimedia website Mistergoodeal.

Darty also continues to review its Datart business in the Czech Republic and Slovakia, but has not yet taken a decision on the future of these operations, Schultz said.

By 0855 GMT, Darty shares gained 2.16 percent, extending gains of 8 percent so far this year, and outperforming a European retail sector, which was up 0.47 percent. (Reporting by Dominique Vidalon; editing by Jason Neely and Andrew Callus)