Darty says market remains challenging as Q4 sales improve

(Adds details, CEO comments, shares, analyst comment)

By Dominique Vidalon

PARIS, May 21 (Reuters) - Darty Plc, Europe's third-largest electrical goods retailer, said on Thursday its markets remained challenging despite improving consumer confidence, with competition from smartphones hurting tablet and digital camera sales.

Darty, which competes with Metro (Other OTC: MTRAF - news) 's Media-Saturn and Britain's Dixons, posted a 0.5 percent decline in like-for-like fourth-quarter revenue, marking an improvement from the 2.9 percent decline in the third quarter.

Sales at Darty France, which represents 70 percent of group revenue, fell 0.7 percent like-for-like, improving from a 3 percent drop in the previous three months. On a reported basis, group sales rose 3.5 percent, while sales in France grew 2.8 percent.

Like larger rivals, London-listed Darty has been battling weak consumer spending and competition from online retailers.

With some 400 stores in Europe, Darty has responded by cutting costs, exiting loss-making operations in Italy, Spain, Turkey and the Czech Republic, and focusing on its core markets of France, Belgium and the Netherlands.

Darty also bought online retailer Mistergooddeal last year to get a better foothold in the sector. Online sales now account for over 15 percent of total product sales, or 17 percent including Mistergooddeal.

Darty is banking on the rollout of a franchise business to help weather difficult market conditions in France, where it now has 43 franchise stores.

French consumer confidence rose for the third consecutive month in April to reach its highest level in over five years, INSEE data showed last month, although nagging concerns about unemployment meant it was still below the long-term average.

Chief Executive Regis Schultz told Reuters by phone he was "comfortable" with forecasts from market researcher GfK for a 2 percent decline in the overall French market in 2015.

"There are positive signs on French consumer confidence, which benefit household appliance purchases, but smartphone competition will continue to weigh on tablets and camera sales," he said.

Fourth-quarter like-for-like sales came below market expectations of a 0.3-0.4 percent rise, but Natixis (Paris: FR0000120685 - news) analysts said the trend was "encouraging after a difficult year".

By 0936 GMT, Darty shares were down 4 percent. Trading volumes stood at around a tenth of their three-month daily average in early trading. (Editing by James Regan)