(Recasts and adds detail and comment.)

By Lilly Vitorovich

Of DOW JONES NEWSWIRES

LONDON -(Dow Jones)- Shares of U.K.-based electrical-goods retailers such as Kesa Electricals PLC (LSE:KESA) (KESA.LN) and DSG International PLC (LSE:DSGI) (DSGI.LN) Tuesday slumped on growing fears about deteriorating trading conditions.

Carphone Warehouse PLC (CPW.LN), the largest mobile-phone retailer in Europe by sales, and navigation-device maker TomTom NV (Euronext:38705) (38705.AE) also came under pressure.

Investors were unsettled after Kesa warned of a "continuing decline in consumer confidence" and "further difficult trading conditions ahead."

Given Kesa's bleak outlook, downgrades are "quietly going through" the market, Pali International analyst Nick Bubb said. Bubb is reviewing his buy rating on Kesa.

Panmure Gordon has downgraded the stock to a sell from buy, while Dresdner Kleinwort has cut its target price to 175 pence from 200 pence.

Carphone shares reacted to Kesa's figures and its warning of tough trading conditions ahead, said a trader. "This does not bode well for their joint venture with Best Buy (Co. Inc. (NYSE:BBY) (BBY)) to sell electrical goods," he added.

At 1456 GMT, Kesa shares in London traded down 19 pence, or 11.2%, at 155 pence, with DSG down 5 pence, or 10.8%, at 41 pence. Carphone fell 8 pence, or 3.8%, to 198 pence in a broadly lower London market.

In Amsterdam, TomTom shares traded down EUR1.17, or 6.1%, at EUR18.08.

Faced with difficult trading conditions, Kesa Chief Executive Jean-Noel Labroue said the group will "focus on maintaining product margin and improving productivity."

The bleak outlook overshadowed Kesa's 1.8% rise in proforma pretax profit to GBP128.8 million for the 12 months ended April 30, in line with market expectations, from GBP126.5 million over the same period a year ago. Kesa has released proforma figures after changing its financial year end to April 30 to improve internal planning processes.

With pretax profit in line with expectations, analysts - including Seymour Pierce's Freddie George - were disappointed that there was no share buy-back announcement following the EUR550 million sale earlier this year of Kesa's French furniture and electrical-goods business BUT to a consortium consisting of Colony Capital, Goldman Sachs and Merchant Equity Partners.

Chairman David Newlands said, "We will keep this under review and believe that there are benefits to the group maintaining a strong balance sheet in light of current market conditions and with a view to taking advantage of potentially attractive future investment opportunities."

Revenue fell 14% to GBP4.51 billion over the 12-month period from GBP3.96 billion a year earlier as consumers, particularly in the U.K., pulled back on spending.

The group's primarily French business, Darty, booked a 5.6% rise in like-for- like sales from stores open at least a year in the fifth quarter of fiscal 2008 from a year earlier, thanks to strong demand for large flat-screen televisions, camcorders and video game consoles, executives said on a conference call with reporters.

French consumers, who have a history of saving, aren't suffering from the credit fallout as much as those in the U.K., the executives added.

Like-for-like sales at its U.K. unit Comet were up 0.3% in the fifth quarter from a year earlier.

U.K. retail sales data for May were much stronger than expected last week, with sales of electrical goods up 3.2% for the month. Home Retail Group PLC (LSE:HOME) ( HOME.LN) said recently that sales of video game consoles and related products were exceptional in recent months.

However, management expect like-for-likes sales to fall given rising living costs.

Kesa declared a final dividend of 3.6 pence a share, taking the total for fiscal 2008 to 17.9 pence.

Company Web site: www.kesaelectricals.co.uk

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@ dowjones.com

(Michael Carolan and Jeannie Clarke in London and Tjeerd Wiersma in Amsterdam contributed to this article.)

    (END) Dow Jones Newswires   06-24-08 1128   Copyright (c) 2008 Dow Jones & Company, Inc.