Comet, another big name UK retailer to bite the dust?

The UK High Street may be about to lose another big name icon retailer with reports that Comet is about to go into administration.

Comet, the electrical retailer, is close to going into administration, putting about 6,000 jobs at risk, reports say.

The company, bought by private equity firm OpCapita last year for just £2, has struggled from the downturn in consumer spending.

Two weeks ago, OpCapita said it was examining a number of potential bids for 240-strong chain.

But there are reports Comet will appoint an administrator imminently.

http://www.bbc.co.uk/news/business-20164228

Comet was once part of the Kingfisher Group, which has managed so far to avoid the fate of other retailers and has actually been a case of steady as she goes with a solid performance over the last 5 years. They clearly saw that the writing was probably on the wall some time ago for Comet, competing in a crowded market place with the likes of Dixons, Currys, PC World, etc. Dixons share price this morning is up around 13% at time of writing, partly due to a last man standing in the High Street approach that suggests that once Comet has gone it will pick up some market share. Same could be said for Home Retail Group.


However, there is a problem with this scenario. The same thought processes were at work at one stage for HMV, that is as competitors like Woolworth and Zavvi closed, it was the last entertainment retailer left standing and it just might pick up those customers.  In reality, HMV has continued to struggle, reporting regular profit warnings and is now trying to change by moving away from a reliance on old entertainment technology items like cd's and dvd's, to selling the kind of products that you would normally find at Dixons and, yes, Comet.

The problem for all of these retailers is the move to online shopping and the threat of big players like Amazon who can operate more cheaply as they don't have the running costs of a High Street store, especially the commercial rent.

I'm tempted to think that given time Dixons and HMV may well survive and find a new niche for themselves, but they will have to do more online and find a way to tempt customers from the likes of Amazon and Ebay if their share price is ever to reach the glory days of the past. Perhaps that is too much to ask, but you never know, there is the potential for big turnaround stories here if they can survive the next few years.

The shares of both Dixons and HMV are perhaps for the brave, more of a gamble on surviving, a buy with money you can afford to lose. If it works there is money to be made from buying when shares are so depressed that no one wants to know and Dixons has more than doubled in price since it reached its low of under 10p as there is now hope that its survival plan is beginning to work. It is still a long way from its highs of over 200p pre 2007.  HMV are a bigger disaster, having once been over 220p and once turning down a private bidder that was prepared to pay close to that to take it off the market. At around the current 2.6p that has to be one of the worst decisions ever made, short of actually going bust, in the interests of shareholders.