Hi-Tec value slumps after profit warning

SHARES in Hi-Tec Sports collapsed 40 per cent to 106p after the footwear company issued a surprise profits warning.

About pounds 30m was wiped off its market value, to pounds 44m, after it told shareholders that this year's results would be significantly below City expectations.

The downturn has been prompted by a high street price war that has led to heavy discounting of most leading brands such as Nike and Reebok.

This has put Hi-Tec's own product range, priced at the middle of the market, under pressure. In addition, the company has been hit by falling consumer spending in the past two months.

Franklin van Wezel, the company's chairman and biggest shareholder, said: 'Our UK sales so far this year are significantly below those achieved in the corresponding period last year and are below our expectations.

'We are experiencing a sharper squeeze on margins. Inevitably, these factors will have an adverse impact on our overall results in the first half of this year.'

The news led to sharp downgrading of profits forecasts by City analysts, and most now expect Hi-Tec to report a pre-tax surplus of about pounds 5m for the year to 31 January, against pounds 9.1m last year.

The price war reflects an increasingly fierce battle among US sports shoe giants for market share in Europe. Hi-Tec said low growth in demand for sports shoes in the US had led to a glut there and consequent dumping of stock in Europe, where prices have traditionally been much higher.

Hi-Tec estimates that the prices of leading brands have fallen by between 15 and 50 per cent, driving down the average from about pounds 55 to pounds 35 a pair.

'These products are now in our price range but we have been determined not to lose market share so we have also cut our prices,' Ashley Reynolds, Hi-Tec's group services director, said.

As a result, the average price of its shoes has fallen from about pounds 30 to pounds 23 a pair. The company had a 20 per cent market share last year.

Like most of its competitors, Hi-Tec sources its products from the Far East, where they are manufactured by sub-contractors to the company's specifications.

However, it is now planning to cut costs by laying off 30 staff from a total UK workforce of 140.

There are growing rumours that Pentland Industries, the UK-based leisure group, is planning to table a bid for Adidas, the German sportswear company in which it has a 20 per cent stake.

Last week Bernard Tapie, the French entrepreneur who controls Adidas, said he had received a DM1bn (pounds 345m) takeover offer from a consortium led by some of its managers. Pentland, which has the right to match any rival offers, refused to comment.