Comet Electricals Chain On Brink Of Collapse
More than 6,000 jobs are under threat as the high street braces itself for another high profile casualty.
Comet, an electricals chain, will go into administration next week after struggling to stock up for Christmas.
Staff were informed of plans on Thursday morning and restructuring specialist Deloitte has been lined up to handle the administration.
Comet has been trading without credit insurance, which protects its suppliers should the business fail, amid a cash-flow shortfall.
If the credit insurers withdraw their support it tells suppliers that the company cannot be trusted to pay its bills.
The future of the business in question is then a fait accompli.
The potential collapse raises the prospect of a pre-Christmas rush for discounted stock such as TVs and PCs at its 235 stores if the administrator chooses to wind down supplies and raise cash for creditors.
It will also be a boost for rivals Currys, who often jostle for market share sited cheek to jowl on retail parks.
Comet has based its business model on edge of town superstores. This was once, not so long ago, very convenient.
Nowadays the most convenient way to shop is online making Comet's model out of date.
Comet is owned by OpCapita, which bought it for just £2 less than a year ago from Kesa Electricals as it struggled to compete against strong supermarket and online competition.
This has also accounted for the troubles experienced by the likes of Clinton Cards and Game.
Sky News reported last month how OpCapita had received a number of unsolicited approaches for Comet and was exploring the option of a sale as a result.
News of the chain's cash problems come only weeks after JJB Sports called in administrators, resulting in 2,000 job losses.
The Financial Times reported OpCapita was likely to face controversy as it had received a £50m cash dowry from Kesa, now known as Darty, to take it over.
Darty also retained Comet's pension liabilities.
OpCapita also negotiated a £130m dowry before it bought furniture chain MFI in 2006 which later collapsed.
According to the Local Data Company and PwC an average of 32 chain stores a day closed in July and August, underlining the challenges facing the wider high street.