Suppliers in 'weak position' as administration looms for Comet

1 November 2012

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1 November 2012 | Anna Reynolds

As electrical retailer Comet appears to be on the verge of administration, retail analyst Verdict Research told SM the position for its suppliers “looks even weaker”.

Matthew Rubin, associate analyst at Verdict Research, told SM: “We know Comet was having payment issues with its suppliers a few months ago when it was being taken over by OpCapita.”

He said that, at the time, Comet’s suppliers were having problems getting their own insurance to cover them and had insisted on upfront payments, which affected the company’s cash flow. Comet was resolving the problems, but Rubin said it would appear the issue has not gone away as reports of the company’s looming administration were published today. Comet, which has around 7,000 employees and 240 stores, refused to comment on these reports.

Rubin warned that if Comet does go into administration while in debt to its suppliers, vendors might have problems recovering what they are owed as they are low on the list of secured creditors.

Comet was taken over by capital investment firm OpCapita at the start of the year, which meant stricter controls on cash flow were put in place, with a focus on cutting back overheads. But Rubin pointed out that Comet’s competitor Dixons, rather than cutting back, is investing in customer service and focusing on offering best value on its products. He said that being an out-of-town retailer also put Comet at a disadvantage compared with high street chain Dixons because shoppers are less willing to travel.

There are reports that Deloitte will handle the administration, but the company told SM it has not yet been appointed.

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