Kesa Electricals, owner of retailers Comet and France's Darty, posted a 61.7 percent rise in its first half pre tax profit on Wednesday, but its shares fell on market jitters about its outlook and profit mix.
The share price was down 3.5 percent at 320 3/4 pence by 9 a.m., underperforming a 0.2 percent fall in the DJ Stoxx European retail sector index.
The particular strength of demand factors in the current year, the adverse effect on margin of new technologies, together with our investment plans, will impact profit progression next year, Chief Executive Jean Noel Labroue said in a statement.
He later added in a press briefing his expectation was that next year's profits would not increase at the same rate as this year when earnings were boosted by strong trade in flat screen televisions during the summer's football World Cup.
Brokerage Bridgewell cut its rating on Kesa to hold.
The trading statement points to upgrade potential but we are reticent given the worse than expected profit mix, Bridgewell analyst Charles Nichols said in a note.
Analysts said Kesa could also struggle with heavy price deflation in the sector, with Comet facing additional pressure from supermarkets and online retailers.
We maintain our negative stance given concerns about the second half of the year and the low margin, highly competitive nature of electrical retailing, Numis Securities analysts said.
Other analysts suggested the shares were down due to profit taking following a price spike this month on bid speculation.
Kesa stock has outperformed peers in the past month, gaining 7.5 percent and outpacing a 5 percent rise in the DJ Stoxx European retail sector index in part on speculation German giant Metro could be considering a bid.
Chairman David Newlands told the conference call Kesa never comments on market rumours of this type.
Kesa rejected a bid worth 1.72 billion pounds from an unnamed private equity consortium on March 14.
WHITE GOODS UPTICK
Its first half pre tax profit rose to 39.3 million pounds, topped expectations, buoyed by the television sales. Analysts had predicted its first half pre tax profit would come in at around 35 to 36 million pounds.
Its interim dividend was increased 10 percent to 3.25 pence per share.
However, Bridgewell said retail profits were boosted by 6.1 million pounds of premiums received on lease exits.
Group retail profit increased by 28.9 percent to 48.6 million pounds. Basic adjusted earnings per share increased 51.4 percent to 5.3 pence per share.
Excluding these gains underlying profit was therefore below expectations, Bridgewell's Nichols said.
Moving into the second half, Labroue said August trading was particularly good, helped by strong sales of laptop computers as children went back to school.
Labroue said he expected sales in flat screen televisions would run at a lower pace. But 'white goods' sales which have sagged in the year, were seeing a bounce in demand.
We are reasonably satisfied to say the market is back to stable growth. Not only refrigeration, but also washing machines and dishwashers. It is good to see this market returning to growth, Labroue said in a press briefing.