Comet collapse: Deloitte blames internet and lack of first-time home buyers.
Comet has officially collapsed into administration, putting more than 6,000 jobs at risk. Here, Deloitte, which has taken over the running of the business, explains what happened.
Neville Kahn, Nick Edwards and Chris Farrington of Deloitte, the business advisory firm, have today been appointed Joint Administrators to Comet, the electrical retailer.
Comet, which is headquartered in Rickmansworth, operates out of 236 stores across the UK, and employs 6,611 people – a full time equivalent workforce of 4,682 employees.
Like many other retailers, Comet has been hit hard by the uncertain economic environment, slow consumer spending and lack of consumer confidence. The electrical retail sector has been particularly challenging, with fewer people buying big ticket items, and fewer first time property buyers who have historically been an important market for the Company.
Despite significant investment in the business and the efforts of the experienced management team, Comet has struggled to compete with online retailers which have far lower overhead costs and can offer cheaper products.
Against a backdrop of continuing weak sales, and speculation that Comet was being approached by prospective buyers, suppliers have been reluctant to provide credit terms, which has had a negative effect on cash flow. The inability to obtain supplier credit for the peak Christmas trading period, means that the Company had no realistic prospect of raising further capital to build up sufficient stock to allow it to continue trading.
As a consequence of all these factors, the directors of Comet had no choice but to seek Administration.
Neville Kahn, Joint Administrator and restructuring services partner at Deloitte, commented: “Comet has been battling the changing landscape of the electrical retail sector for many years. It has become increasingly difficult for it to compete with online retailers which don’t face the same overheads such as store rents and business rates.
“Our immediate priorities are to stabilise the business, fully assess its financial position, and begin an urgent process to seek a suitable buyer which would also preserve jobs.
“In the meantime, all stores will continue to trade and all employees will continue to be paid. We appreciate the cooperation and support from the management, staff, customers, landlords and suppliers at what is clearly a very difficult time.”
Extended warranties previously purchased are unaffected by the administration and remain valid.