Feel-bad factor hurts Kenwood

It is just as well that shares in the electrical goods maker Kenwood did not come with a three-year warranty when they were floated on the stock market. Investors would have been queueing for refunds after a 30 per cent underperformance of the market since June 1992.

Yesterday's results for the year to March did nothing to improve the City's view of the stock. While profits before tax rose from pounds 11m to pounds 13.5m, there was concern over a half percentage point fall to 9.6 per cent in operating margins at continuing businesses.

Kenwood's shares fell 7p to 261p as analysts cut their forecasts yet again. A pre-tax outcome of pounds 17m, down from pounds 18.5m, is for the time being the new consensus for 1995/96.

The shares are adrift of both the 285p flotation price and last November's rights issue, made at 310p to buy Ariete, the rival Italian group. The message is that economic recovery is still by-passing consumers, who remain stubbornly reluctant to air their wallets in public. Sales in the UK, which still account for 20 to 25 per of total turnover despite the group's continued push overseas, remain flat and are still highly dependent on Christmas trading.

Difficulties in the high street are being compounded by destocking and by the continued rush for the exit by a growing number of electrical retailers, particularly the regional electricity firms.

Raw material prices, especially packaging, are also rising, although the effect has been mitigated to an extent by the weakness of the dollar, in which many commodities are priced. Sterling's weakness against other currencies has also helped the export drive.

The shares, pricey on earnings measures, would probably fall further but for a supporting gross yield of 5.3 per cent - assuming the dividend rises to 11p. Best to wait and see what Santa brings.