What are the options left on the table for Comet which, as revealed by Retail-Week.com today, intends to enter administration next week?
Unfortunately for staff, liquidation seems like a plausible option for Comet. As in the case of JJB, a piecemeal sell off of Comet’s 240 store estate would then commence. A number of retailer’s with a stated ambition to increase their out-of-town portfolio – including Dunelm, Kiddicare, Dobbies and HobbyCraft – will likely be interested alongside traditional rivals Dixons and Maplin who are reportedly interested in a “small handful” of stores. However, many of Comet’s stores are not on premier sites thus dampening the interest for some retailers.
Comet could also end up operating solely as an online business in a similar vein to Zavvi, MFI and Woolworths if its name and domain are purchased. A new owner may be able to use brand heritage and existing supply links to continue trading. However, with the brand name tarnished and relationships with suppliers already fraught the likelihood of being able to compete with Amazon and other specialist pureplays with any clout is unlikely.
Sale to white knight out of administration
Earlier this month three potential suitors including store operators and private equity firms were rumoured to have approached Comet owners OpCapita to lodge a bid. In July, Comet said it was on track to return to the black this year and is changing gear to focus on top-line growth. However, with thin margins, competition from online and even market leader Dixons finding life difficult, Comet is unlikely to be an appetising investment prospect. Sources close to the retailer have suggested the business may make a good speculative investment by a Chinese retailer looking to gain a foothold in the UK market - Chinese specialist Gome Electrical has previously been linked with Comet, for instance.
There remain no obvious suitors for the business however private equity turnaround specialists Hilco and Endless could swoop if they see an opportunity. As with the high profile administrations of Clinton Cards, Peacocks and Game earlier this year, the process could be drawn out before a deal is done.
Pre-pack administration/management buy-out
A controversial pre-pack administration would allow Comet’s assets to be sold immediately after it has entered administration. Comet chief executive Bob Darke has emerged from the retailer’s current plight with little criticism from those close to the business and he and chairman John Clare may look to stage a management buyout. Both are well connected in retail and may look to gather investors to back the buyout.
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Analysis: What next for Comet?