Kesa sees slowdown after strong last quarter

By Mark Potter

LONDON (Reuters) - Electrical goods retailer Kesa said sales growth had slowed after a strong end to its last financial year and that it was deferring plans to return cash to shareholders amid worsening trading conditions.

Shares in Kesa, which runs market leader Darty in France and Comet in Britain, fell as much as 6 percent on Tuesday, dragging down rival DSG International and electrical goods makers such as Dutch car navigation firm TomTom.

"In the six weeks since the year end we are not at all in the trend (of the previous three months)," Chief Executive Jean-Noel Labroue told reporters.

He added that sales at stores open at least a year were likely to fall at Comet over the coming months, and would probably be at best flat at Darty.

"Given the strength of the balance sheet, we believe Kesa will prove to have been oversold on a medium-term view, perhaps even catching the eye of those engaging in industry consolidation," said Shore Capital analyst John Stevenson.

"However, with concerns over the electricals markets overall likely to leave the share price depressed for some time we reiterate our 'hold' stance."

Europe's retailers are battling a slowdown in consumer spending amid rising fuel and food costs, with trading in Britain particularly hard hit by a sinking housing market.

Kesa shares have underperformed the DJ Stoxx European retail index by about 7 percent since the start of the year, dented by its exposure to British markets, although the group makes most of its profits in the more robust French market.