Blacks Leisure in profits warning
Friday 25 November 2011
Blacks Leisure today warned full-year profits would be lower than expected as the gloom on the high street continued to heap pressure on the outdoor clothing group.
Blacks Leisure, which owns the Blacks and Millets brands, said sales had been lower than expected in the last few weeks, prompting the group to lower prices in a bid to pull in more customers.
But low confidence and squeezed consumer spending, driven by high prices, sluggish wage growth and a bleak economic outlook mean the group expects its Christmas and full-year performance to fall below expectations.
Blacks, which more than doubled pre-tax losses in the six months to August 27 at £16 million, said it continued to seek additional funding and other financing options to execute turnaround plans, which would include revamping its 300 Blacks and Millets stores.
Shares in Blacks crashed 60% following today's trading update to 1.8p a share.
Kate Calvert, retail analyst at Seymour Pierce, maintained her sell recommendation and said: "We believe it will remain a challenge to come up with an acceptable solution for the company's long-term future."
Blacks is likely to have been hit by the warm weather in October and November as much of its clothing is aimed at harsher conditions, such as fleeces and waterproof jackets.
Clothing retailers, including Top Shop owner Arcadia and department store John Lewis, have all flagged the record temperatures over the autumn as an obstacle to sales growth.
The unseasonal weather added to the general malaise in the retail sector, which has seen a raft of companies issuing profit warnings and announcing store closures.
Blacks reported a 7.2% decline in like-for-like sales in its half-year results, covering the 26 weeks to August 27 and today said conditions had worsened.
The company has faced tough competition from Newcastle United owner Mike Ashley's Sports Direct, which controls Karrimor and Field and Trek, as well as specialists such as Go Outdoors and Mountain Warehouse.
Julia Reynolds, who replaced Neil Gillis as chief executive over the summer, previously said its strategic plans would see greater investment focus on the existing store estate, with no net increase in store numbers planned.
The Millets and Blacks brands will be revamped to achieve greater differentiation between the two chains, with further development of own label and own brand merchandise.
The company said constructive dialogue had been maintained with the group's bankers, Bank of Scotland, who "continue to be supportive".
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