02 November 2012 10:10
Comet is to be placed into administration next week in a move putting around 6,500 jobs at risk in the run-up to Christmas.
The chain said it was "urgently working" on plans to secure the company's future and has lined up restructuring specialist Deloitte to handle the administration.
It is expected that administrators will seek a buyer for the business, which has 240 stores across the UK.
Jon Copestake, retail analyst at the Economist Intelligence Unit, said Comet's troubles "come as little surprise".
He added: "Not only has Comet faced deflationary pressures thanks to stiff competition and cheaper production costs, but core audio visual products are being undermined by combined platforms on smartphones and tablet computers."
Customers with outstanding orders and those with gift cards and vouchers are being told it is "business as usual until further notice" and that the group intends to fulfil deliveries of products that have been paid for.
Glynn Mummery, partner at restructuring firm FRP Advisory, said Comet's administration was the latest sign of an embattled UK retail sector, which has been struggling amid a slump in consumer spending.
He warned: "This is a fair barometer of weakening retailer confidence in the mainstream high street for the months ahead."
The administration is among the biggest since the demise of Woolworths in 2008 and comes a month after the failure of JJB Sports. Other recent casualties have included Clinton Cards, Blacks Leisure, Game and Peacocks.
The move raises the prospect of a pre-Christmas rush for discounted stock, with the administrator expected to wind down supplies and raise cash for creditors.
News of the planned administration comes just months after Comet was taken over by investment firm OpCapita, which bought the chain for a nominal £2 in February.
It is thought OpCapita and recently appointed chairman John Clare – the former boss of rival Dixons – had been unable to secure the trade credit insurance needed to safeguard suppliers.
Comet was founded in 1933 by George Hollingbery in Hull as Comet Battery Stores Limited – a two-man business charging batteries and accumulators for customers' wireless sets.
The company moved into the radio rental business and by 1939 had 2,500 accounts.
The first Comet superstore opened in Hull in 1968 and the company was listed two years later, before being acquired by Kingfisher for £129 million in 1984.
Comet then acquired Norweb Retail and increased its store portfolio to more than 250 nationwide in 1996.
It demerged from Kingfisher in 2003, with Comet and its sister electrical companies throughout Europe forming a new group known as Kesa Electricals, which recently changed its name to Darty.
OpCapita said it invested £35 million in Comet after buying the group, while it also received £50 million from Kesa as part of the original sale.
According to OpCapita, the cash was used to provide capital to keep the business going and the buyout group had planned to revive sales by boosting online business and returning Comet to its roots of value-for-money deals.
Comet's former parent Kesa reported full-year operating losses for the chain of 20.1 million euro (£16 million) in its last set of financial results.
John Hannett, general secretary of the shopworkers' union Usdaw, said: "This is disastrous news for Comet's 6,500 employees and more grim news for the UK high street and economy.
"We urge any administrators appointed to keep stores trading for as long as possible to enable a buyer or buyers to be found.
"While every failure in the retail sector has its own specific causes, there can be no doubt that the continuing squeeze on people's incomes caused by the Government's reckless austerity policies lies behind much of the sectors' current difficulties."