Country Casuals stays in the red: The Investment Column

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For much of the past year, Country Casuals shareholders have had few regrets about turning down former chairman John Shannon's opportunistic 140p-a-share bid for their company. The shares reached 179p at one point in the spring.

It has been pretty much downhill all the way since then, however, and yesterday, after disappointing interim figures, they dipped below the offer price for the first time, closing 19p lower at 136.5p. Anyone who has stood by the company has paid a considerable opportunity cost.

Of the company's three divisions, two had a poor first half, so although the interim loss was reduced from pounds 1.04m to pounds 812,000, the company remains in familiar red territory. Analysts' forecasts of about pounds 3.5m profit in the year to next January were yesterday reined in to pounds 2.4m.

The core Country Casuals brand never really managed to recover from a weak first quarter and like-for-like sales were flat in the first half. Worse, because much of that turnover was struck in July during the summer sale, gross margins fell from 60 to 57 per cent. As a result, interim profits were a third lower at pounds 236,000.

The other duff area was Lerose, the manufacturing arm, where sharply reduced demand from one customer led to a rise in the first-half loss from pounds 145,000 to pounds 365,000.

Elvi, the outsize clothes specialist saw year-on-year growth of 19 per cent and a rise in the gross margin but the aftermath of a heavy store- closure programme persists and despite a reduction, the loss was still a sizeable pounds 700,000 (loss of pounds 1.3m).

An increase in the interim dividend from 1.4p to 1.7p was designed to signal confidence in the future, and analysts still expect good growth next year, but until there is more concrete evidence of recovery the shares, on a forward p/e of 16, are high enough.