Kesa Electricals, owner of the Comet chain and Europe's third largest electrical retailer, today reported a 20.4 per cent fall in interim retail profits and warned that the rest of the year could be tough.

Kesa shares fell 5.5 per cent to 261p in early trading while rival DSG International's shares also fell, down 4.6 per cent to 128.6p.

In the six months to July 31 Kesa's retail profit, which strips out gains from joint ventures and associates, fell from £48 million to £38.2 million. Total pre-tax profit declined from £39.3 million to £32.4 million.

Group revenue rose 6.1 per cent to £2 billion, but like-for-like store sales were up only 3.9 per cent.

Kesa said it was now seeking a successor to chief executive Jean-Noel Labroue who will turn 60 at the end of the year and is retiring.

Kesa blamed the profits drop on higher investment across its business with capital expenditure and investments rising from £56.4 million in the first six months of last year to £66.2 million.

Profits fell across three out of five of Kesa's business units including at its French business, Darty, where income fell from £40.9 million to £33.2 million. Comet fell into the red, recording a £1 million loss compared to a £4.8 million profit in the first six months of last year.

The group said revenues had grown during the first half because of strong demand for flat-screen televisions, laptops and a rise in sales of white goods.

Commenting on the retail environment in the coming months, Mr Labroue said: "Trading conditions for the second half of the year are uncertain, particularly in the UK.

"As always, our full-year performance is reliant on our key peak trading period in the fourth quarter of the year and we will remain focused on cost control, cash and margin management and operational efficiencies."

Kesa said it is "progressing steadily" with the search for Mr Labroue's replacement, but that no date had been set for his retirement and that he will "carry on acting as needs be" until a successor is found.

Kesa will increase its interim dividend by 7.7 per cent to 3.5p.

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