Albemarle & Bond, the pawnbroker, will reveal the full impact of a sharp slowdown in gold prices and consumers buying the precious metal in its full-year results on Tuesday.
Until this summer the pawn- broker had powered through the prolonged consumer downturn, boosted by hard-pressed shoppers both exchanging their gold jewellery for cash and purchasing rings, earrings and necklaces at lower prices than in high street shops. But this market appears to have temporarily run out of steam as a result of falling gold prices earlier this year.
Albemarle & Bond issued a profit warning in June after admitting the value of gold bought had "slowed significantly", from more than 50 per cent in the first half to "middle single digits" in the last eight weeks of its financial year. Its rival H&T followed suit in August and blamed stagnant gold prices, tough trading conditions on the high street, and the costs associated with a rapid store opening programme for its half-year profits falling by more than a third.
However, Albemarle & Bond is still expected to deliver a marginal uplift in pre-tax profit to £21.3m for the 12 months to June 30 after robust trading in parts of the business, such as unsecured loans.
The pawnbroker is also likely to reaffirm its store expansion programme, with about 25 new shops scheduled for this year.
Back in June, Albemarle & Bond said: "The recent marked slowdown in gold buying activity, combined with a lower prevailing sterling gold price, has had an immediate impact on both volumes and margins."
The company's stock has fallen sharply from a 12-month high of 372p in February, and since May has largely traded at less than 300p. Gold prices have recovered over recent months and were trading at $1,773.8 per ounce on Friday but remain a long way below last September's price of $1,900.
Canaccord Genuity's Michael O'Brien forecasts the pawnbroker will post a 17 per cent leap in total sales to £119m in 2011-12, buoyed by new store openings.
Founded in 1983 from a single shop in Bristol, the company now trades from more than 230 shops under the Albemarle & Bond and Herbert Brown banners. It acquired Herbert Brown, which was established in 1840 in Leeds, in 2007.