Consumer slowdown hurts Kesa

22.11.2007

Kesa Electronics, owner of Darty electronic stores in France and Comet here in the UK, took a record hit on the market today in a further signal that the UK consumer is beginning to feel the pinch in his pocket. Shares dropped 9.2% after the company announced a significant drop up in sales growth for the third quarter. The fall off in sales was especially pronounced in UK stories, notes Sarah Thompson on Bloomberg, with higher interest rates being blamed by the company for the fall in spending.
 
But with rising mortgage payments and utility bills eating into household budgets, it's hardly surprising that the British consumer isn't forking out for a new dishwasher or clothes dryer. Sales of so called white goods such as washing machines and refrigerators fell two to three per cent at Kesa stores during October, compared to 'low single digit' growth the in the goods last year. Kesa's shares have already fallen 34% this year, erasing all of last year's gains.
 
Despite the mounting fears about UK retailers, Legal & General Investment Management urged investors not to 'write off the UK consumer'. The emerging market stocks that investors have flooded to during the most recent market turmoil will prove a risky bet, L&G's Julien told Reuters, and cash rich over 75s who are not exposed to the credit problems will drive spending at retailers - 'think long M&S, short emerging markets'. But with the cost of oil and food escalating, investors have every right to conclude that we'll see more disappointing announcements from companies like Kesa.
 
Kesa¹s announcement indicates that "it's going to be a very challenging environment going forward,' said Stephen Pope, chief global market strategist at Cantor Fitzgerald in London.