Feelgood factor eludes retailers

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The Independent Online
The feelgood factor looked as elusive as ever on the high street yesterday when two clothing retailers, Etam and Austin Reed, reported sharply reduced profits while the Wickes DIY group warned that its first- half profits would fall "significantly below" last year's pounds 9m. The company blamed the poor winter weather and the lack of improvement in the housing market.

Only DFS Furniture, the out- of-town specialist, managed to buck the trend with a 16 per cent rise in profits to pounds 15m at the half-year stage. Recently knighted chairman Sir Graham Kirkham also unveiled an expansion programme that will see DFS open stores in London for the first time this year. Stores in Croydon, Sidcup and New Malden will open by July.

"We are not budgeting for any upturn but if there is any improvement we will be able to take advantage," he said.

Etam said the market remained "difficult" and the 226- strong chain has seen sales decline in recent weeks as its customers continue to seek discounted merchandise. However, Austin Reed is seeing a glimmer of recovery with sales in the last 12 weeks 8.6 per cent higher than the same period last year.

Finance director Chris Thomson, who takes over as Austin Reed's chief executive in June, said: "I think there are some encouraging signs that customers are coming back to the high street. I'm not sure it's a feelgood factor. It's just less of a feelbad factor."

Austin Reed saw pre-exceptional profits slump from pounds 5.8m to pounds 3.4m due to a poor year in its womenswear division. The company moved from its traditional tailored look to a more fashion-conscious offer but found it unpopular with customers. The stores had to discount the stock to clear it. This year the company has returned to more formal, structured suits and says sales are responding.

Menswear performed better though margins were affected by higher marketing costs. Austin Reed has opened a shop under the Marlboro Classics name at Heathrow's Terminal One in the last few weeks. Trading is strong and more may be added.

Mr Thomson played down speculation that the company may be taken over by Moss Bros, Burton or Next. "We have received no approaches or expressions of interest," he said. However, he confirmed that he had twice been asked by the Stock Exchange if any approaches had been made after recent sharp increases in the Austin Reed share price.

Etam's tale of woe continued as it attempts to move away from a culture of permanent discounting. Reporting a dramatic slump in profits from pounds 10.7m to pounds 152,000 for the six months to 31 January, Etam warned that it was likely to record operating losses higher than the pounds 660,000 deficit reported in the first half last year. This is due to sluggish sales of "inadequate" merchandise which have further been depressed by attempts to sell at closer to full price.