The Max Attacks: This month I'd fire the whole management team at Comet

Each month, we grant LBC Radio presenter James Max the power to demolish and abolish the businesses he’s least impressed by. Read on for a deconstruction of Comet’s downfall

Comet. It doesn’t fill you with glee, does it? A retail experience that I’d rather avoid.

And so, it would seem, would you. Comet’s last published trading figures were nothing short of a disaster. Revenues for the six months to 31 October 2011 were down nearly 18 per cent. It announced a £22.6m loss.

I know I am only supposed to fire one person, but I am feeling in a benevolent mood. I’d like to spread the love. I’d fire the lot of them. Management of Comet. Management at their parent company. And their advertising agency. And their website designers, and while we are at it, their PR team as well.

Before I go into what appears to be wrong at Comet, it’s worth analysing the wider group: Kesa Electricals plc, the name of the holding company.

Listed on the London Stock Exchange, Kesa Electricals is Europe’s third largest electrical retailing group, operating in 10 countries. It sells a range of electrical, electronic and telecommunications products under a range of retail brands and formats.

On the 9 November 2011, the company announced that it had entered into an agreement to sell Comet Group plc, the UK arm of the business, for £2. Yes, £2 - and Kesa Electricals is having to give buyer OpCapita a further £50m on top of that. (The disposal is due to take place by the beginning of February.)

Senior management has been rewarded for failure. If I were a shareholder, I’d be rather cross.

Regardless of the planned disposal, management is there to manage the business, but also to time its acquisitions and disposals carefully so as to maximise shareholder value and performance.

It seems to me that management have done none of these things. If they were to sell, they should have done so before the brand was damaging shareholder value, or after they had turned it around.

Instead they are selling at just the wrong moment in the economic and retail cycle.

For some reason, we rarely look at the people behind a brand, who are paid very well indeed, for doing a bad job.

Kesa Electricals plc was demerged from Kingfisher Group in 2003. Since that time, management have failed to capitalise on the changing nature of retailing, particularly in the UK, and they have relied on a rather traditional model of selling electrical goods. No wonder performance has been poor.

We all know retail is suffering at the moment. However, we also know the market is polarising. Those retailers who gain the trust of the public, deliver what they want at the right prices and with service, are doing well. Those that don’t, aren’t.

It’s astounding given their market position, buying power and the relative homogenous nature of the products they sell, that the management have not been able to keep Comet profitable.

Look at the board of Kesa Electricals, and there’s barely anyone with any particular expertise in consumer technology. And there are no women. No one with any spark.

Two key individuals run Comet. Bob Darke joined as their MD in May 2011 and Mike Rooney joined in the board in 2007.

Neither has created much of an impact in the world of retail, and I’d hardly look at their CVs and say “wow”. However, it would appear that the problems at Comet are above them, and rather lie at senior management level.

David Newlands is the chairman of Kesa Electricals plc. With a background in accountancy, and advertising (as an FD), he’s not exactly a retailer by training or experience.

Then there’s Thierry Falque-Pierrotin, the CEO, on a base salary of just over a million euros, plus bonus payments, plus benefits. His background is in building materials and e-retailing of fashion and home furnishings.

His finance director is Dominic Platt, who developed his career at that well-known success Cable & Wireless. According to Comet’s report and accounts for 2010, Mr Platt was paid a base salary of just over £360,500, plus a guaranteed bonus payment of £170,000, plus all the usual benefits such as car, health and pension.

(Following the change in the pension legislation, where £50,000 per annum is the cap for company contributions, senior execs are being given lump sums instead.)

Look at the board of Kesa Electricals, and there’s barely anyone with any particular expertise in consumer technology. And there are no women. No one with any spark. Just a collective of miserable (and expensive) mediocrity.

As for the non-execs, they are way too old - all are in their 60s or 70s. For a company selling products aimed for the most part at the younger market, how on earth does this lot provide anything other than an excuse for a jolly nice lunch and yet another non-exec position on their CV?

Edith Bowman does the advert’s voiceover. That’s about as cool as a pair of Crocs on an unfit, balding man in shorts once size too small and a Hawaiian shirt.

Why am I telling you this? Because senior management has been rewarded for failure. If I were a shareholder, I’d be rather cross. Back in August 2011, the share price was over 140 pence a share. Now it’s just over 65 pence.

Just before their demerger announcement, they limped to just over 110 pence per share. Since then, it’s gone from bad to worse for the poor shareholders. Dismal.

Managements’ own performance indicators suggest that payments will be made for tracking the FTSE 350. Which is itself a dreadful way to monitor performance. But they have not even matched that.

Here we have a classic example where rewards are safeguarded on the downside and pay-outs given almost regardless of achieving the upside.

And what of Comet? Its adverts are abominable. A tired old soundtrack, first released in 2005, entitled “Ska Cubano”. The company has overused it. Cheap and tacky graphics too. A teen YouTuber would do a better job.

As for the voiceover? Edith Bowman. About as cool as a pair of Crocs on an unfit, balding man in shorts once size too small and a Hawaiian shirt.

The ad was created by Euro RSCG, under the banner “Come and Play”. What? Play? In a shop? You are joking aren’t you? I don’t see any successful retailers suggesting that customers pop in to use their stores as a social hub, or somewhere to take the kids for an afternoon because austerity has got so bad that we have got nothing better to do.

So I’d fire the agency too.

When you get into a store, I’ve found there is no informed service or impartial advice. And there is no differentiation between price and whether a product is any good. Comet has a website that’s no better than an early attempt to “go digital”.

If you want a laugh, search for @cometplc on Twitter

If Comet were selling challenged products, I’d understand a collapse in sales. Indeed, share prices for many firms have taken a battering.

In this instance, management are largely responsible for the decline. They are selling technology that, although price-challenged, should be roaring ahead. The tech is cool, fashionable, and everybody wants a piece of it. But not from Comet.

Just look at the company’s uninspiring selection of press releases. Everything is based around hooks like “Five of the Best Clock Radios from Comet: Daylight Saving Begins”. How inventive.

There’s more. “Mega Monday at Comet”, an indolent release reflecting the day when we were supposed to go off and buy our Christmas presents.

Coinciding with National Energy Saving Week, National Parents’ Week and National Baking Week, a slew of listless and banal comment.

I am no marketing expert. But even I know Comet’s marketing strategy is at best crass.

Talking of crass, the social media strategy is woeful. Although, if you want a laugh, search for @cometplc on Twitter to see the litany of complaints and unsatisfied customer comments!

Certainly for OpCapita, the buyer of Comet, there is a platform on which to build. Just as long as you fire all the existing management, rebrand your stores, redesign your websites, update your social media strategy, fire your ad and PR agencies and review your sales strategy.

As for the group holding company? On its three measures of “price”, “choice” and “service”, I’d say that the management of Kesa Electricals have not done what they said they would. 

As investors, it’s time to go back to the shop and demand your money back. You’ve been sold a dud.

James Max presents Weekend Breakfast every Saturday and Sunday mornings on London’s Biggest Conversation, LBC 97.3 FM. He is a qualified surveyor and worked in property and finance for 15 years. After working for one of the country’s leading property advisory firms, he completed healthy stints in investment banking and private equity, before becoming a candidate on The Apprentice, which launched a career in broadcast media. Visit JamesMax.co.uk.

Readers' comments (1)

  • .....we hear about the poor shareholders but what about the Comet customers who have lost their deposit and voucher holders that will not be honoured?
    It is time there was a law that mandated for all deposits to be held in an escrow account.

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