Austin Reed warns of halving in profits

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The Independent Online

City Editor

Austin Reed, the upmarket clothes retailer, warned that profits in the year to the end of this month would be less than half the previous year's. Its shares, already poor underperformers over the past year, slumped a further 11p, or 7 per cent, to close yesterday at 151p.

The warning came as confirmation of the gloomy trading picture painted in October, when the company announced a fall in interim profits for the six months to August.

It was the latest in a mixed bag of retail trading statements over the past few weeks, which have seen optimism from the likes of Argos, Dixons and Boots tempered by cautious comments from Sears, Storehouse and Bodyshop.

Colin Evans, chief executive of Austin Reed, said: "As we announced last October, our autumn season's business began rather slowly, and we expressed caution about the final outcome for the year. In our retail business, difficult trading conditions have continued during the remainder of the season, with turnover no more than level with the previous autumn."

He warned that the need to discount clothes and the lingering financial impact of a badly received womenswear range had squeezed gross margins by three percentage points during the year. That would mean pre-tax profits, which reached pounds 7.3m a year ago, would be no better than pounds 3.5m and may be as low as pounds 3m.

Austin Reed has run a successful womenswear business for 15 years, focused on business suits at the top end of the market. But last year it decided to target the casual market, failed to convince its customers and ended up with too much stock that it has had to discount heavily to shift.

Chris Thomson, finance director, said the womenswear ranges, under the new divisional head Susan Monks, were returning to the classic business suits on which Austin Reed made its name. He confirmed, however, that even with better-designed ranges trading remained extremely difficult.

The group's performance has also been adversely affected by the costs of a restructuring exercise in the manufacturing operation at Crewe.

Despite these problems, however, the final dividend is to be maintained at 4p for the year. Even at the lower level of profitability it will be covered by earnings per share.