Electronics retailer Comet confirmed it will enter administration next week after reports showed it has made estimated losses totalling tens of millions of pounds.
In a brief statement the firm, which has more than 200 stores around the UK, revealed the news its 6,000 employees had feared.
It read: “We can confirm we have today taken steps to seek the protection of the court with a view to entering administration next week (week commencing 5 November).
“In the meantime the board is urgently working with its advisers to seek a solution to secure a viable future for the company.”
Earlier this year the Comet Group’s new parent – OpCapita – called meetings with landlords to discuss the terms of rental leases and has refused to rule out possible store closures.
At that time it put dozens of staff into consultation for redundancy and said it “may” close 61 stores as part of its drive to cut costs in the volatile consumer market.
At that time there were believed to be around 30 to 35 poorly performing stores the group wants to exit with redundancy notices handed to staff in support roles around the country.
Now it has emerged the company has made a possible loss of £35m up to the end of April, forcing it to look at its business structure again.
However, it’s currently unclear whether that means possible administration, store closures or part or more sales, this places the jobs of 6,000 people employed by the retail giant under threat.
The business was part of Kesa, now renamed Darty, who paid a £50m dowry over the sale. However, Kesa remains liable for Comet’s pension scheme which is rumoured to be around £40m in the red.
Julian Cahn, insolvency and restructuring partner at law firm Stephenson Harwood, said: “Comet’s problems are a general reflection of the challenges currently facing retailers today – the onslaught of the major supermarkets and exclusively on-line retailers.
“Supermarkets such as Tesco and Asda also now sell the same goods, such as TVs, set-top boxes, laptops, tablets, printers and games consoles.
“In addition and like other business with large amounts of premises (240 stores), each commanding significant square footage, Comet is no doubt also dealing with an increasingly aggressive landlord community.
“This has also left it vulnerable to on-line retailers who obviously have much lower overheads. As with JJB Sports, it also appears that Comet has been a casualty because it has been unable to match its rivals.
“Ultimately, all of these problems will have been exacerbated by the current economic climate in which those relying on non-essential consumer spending are the most vulnerable. Presumably the administrators will be hoping for a successful Christmas and January sale period.”
Tom Leman, head of retail at international law firm Pinsent Masons said: “People will point to the depressed consumer market as the cause of yet another insolvency, but we shouldn’t forget that electronics is one of the most competitive markets with a huge shift to on-line sales.
“Comet was in trouble the first time round when Kesa sold Comet to OpCapita, hence the £50m dowry and the retention of the pension scheme.
“It looks like even that drastic surgery and the expertise of OpCapita has not been able to address the downward spiral of essentially a bricks and mortar retailer.
“Landlords will be upset, but perhaps only a real carve up through administration will provide the business with a cost base and new ownership that can enable it to start to build from the bottom up again.”