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High street slump hits Fraser

House of Fraser, the Dickins & Jones to Army & Navy stores group floated last year, blamed malaise on the high street, the National Lottery and erratic weather for another loss in the first half of the year.

But optimistic comments by the chairman, Brian McGowan, who said he was confident of a restoration of sales growth in the crucial second half, helped send the shares up 6p to 150p yesterday, still 30p shy of the 180p issue price.

The group said this year's pounds 21m refurbishment programme, covering nine stores, had been completed in time for the launch of the autumn season.

Yesterday it also announced plans to take 150,000 square feet at the proposed Oracle retail development in the centre of Reading, which is expected to open before Christmas 1998.

Andrew Jennings, managing director, said they had made progress in a five year strategy to reposition the group to cater for 35 to 54 year- olds in well located stores, offering high standards of service.

They had now completed phase two of the refurbishment of the flagship Dickins & Jones store in London's Regent Street, which had become the benchmark for fashion in the capital, he claimed.

The group reported pre-tax losses of pounds 4.3m in the 26 weeks to 29 July, only marginally lower than the pounds 4.5m in the comparable period. Sales were depressed by the closure of three stores, dipping from pounds 326m to pounds 323m, but HoF claimed underlying growth was 2 per cent on a like-for-like basis.

Mr McGowan said: "There is little current encouragement for the retail sector, whose contribution is so important to the UK economy.

"Consumer confidence has been further eroded by employment uncertainties and higher tax bills.

"Now the National Lottery is taking pounds 100m every week out of the high street, the equivalent of 5 per cent of non-food retail sales."

The profits were hit by the pounds 5m cost of liquidating old stock as HoF marked down lines more than six months old, which were cut from pounds 10m to pounds 1.2m over the six months.

Additionally, there was a pounds 1m charge for writing down stocks at three closed stores at Bradford, Bridlington and South Shields and an estimated pounds 2m as a result of a change in mix towards sales from concessions in the group's 52 stores.

Mr McGowan said they had entered the second half with a further pounds 11m of unsold stock from 1994 autumn and winter ranges.

He was confident the ranges would be cleared profitably and there would be no further mark downs as a result of store and department closures.

Before taking account of a slightly reduced interest charge and flotation expenses of pounds 8.5m in 1994, there was an operating loss of pounds 500,000, compared with profits of pounds 7.1m before. The interim dividend is held at 1.7p.

Investment Column, page 25ionally, there would be no further mark downs as a result of store and department closures. As a result, gross margins should improve, but the return on sales for the year as a whole would be down in the full year, he warned.

The group refused to specify how much of this year's spring and summer ranges remained unsold, although Mr McGowan said it was lower than last year.