Bottom Line: Sears fails to excite

LIAM Strong, chief executive of Sears, is a fast learner. Having disappointed the bulls who were expecting wonderful things from last year's results, he spent much of yesterday talking down the expectations for the current year.

The three-year recovery programme has in effect been completed in two years, he said. Profit improvement will depend more on rising sales than on cost-cutting. But that was the last thing the market wanted to hear. Margins did improve on last year but, at 6 per cent, they are hardly at dizzy heights. There seems little reason why Wallis, Saxone and Selfridges cannot achieve the 11 per cent-plus margins achieved by rivals like Marks & Spencer and Next.

More worrying is that there is no sign of the sales growth that is supposed to take over as the engine for margin growth. Like-for- like sales growth at British Shoe Corporation fell from 7 per cent at the halfway stage to just 2.9 per cent for the year as a whole. While it had a variety of excuses, its new sourcing policies and user- friendly formats should be showing a better result than that.

The 1.1 per cent like-for-like rise in the high street chains was also disappointing, even though the principal cause - the downturn at Adams - had been expected. An autumn revamp of the Adams format may help but, with rival Mothercare having shown signs of improvement for at least a year, the wonder is that Sears has taken so long to act.

The current trading statement looks less impressive if the 40 per cent growth being achieved by Richards is excluded.

The 8.5p fall in its share price to 123p yesterday puts it on a forward multiple of 16.6, based on forecasts of pounds 140m for the year. The 4.4 per cent yield should be set in the context of the need to rebuild cover from the current 1.6 times, on adjusted earnings. Until sales growth starts to show through, there is little incentive to buy the shares.