Blacks stock dives 20% as drought hits profits

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The Independent Online

A dearth of family campers willing to splash out on new tents wiped out interim profits at Blacks Leisure and thrust the company into the takeover spotlight after its shares slumped by one-fifth.

The outdoor gear specialist blamed disappointing sales at Millets, the former army surplus chain, for its second profits warning in two months.

Millets was left with a glut of family-sized tents and unsold waterproofs after the driest summer in decades. The poor August followed a bad early summer, which suffered from Glastonbury's absence from this year's festival circuit and the distractions of a World Cup played in a UK-friendly timezone, which distracted dads from taking their children camping. The group normally counts on July and August to deliver 40 per cent of its sales and even more of its profits.

The problems for Blacks were compounded by its multimillion-pound investment in improving its internet site, switching to a new distribution centre and opening new stores, which increased its costs by £4m. Analysts said the management's credibility had taken a knock for not flagging the costs more clearly when the group last warned on profits.

Shares in Blacks fell 18 per cent to 372.5p, slicing the company's market valuation by £36m to £156m. Analysts said the sharp deterioration in the group's fortunes would prompt private equity groups to run the slide rule over its figures. "Any business where the shares fall back is vulnerable, the more so if it is due to a temporary phenomenon such as bad weather," Mark Charnock, at Investec Securities, said.

Russell Hardy, who took over as chief executive two years ago, denied his position was under pressure. "I've had no negative feedback from shareholders about the management or the strategy," he said. Before joining Blacks two years ago, Mr Hardy ran Dolland & Aitchison, the opticians, which he ended up selling.

At the start of the summer, Mr Hardy was full of optimism on the back of a range of new tents designed by the likes of retro queen Cath Kidston and Ted Baker, the fashion retailer. Camping pundits predicted that "glamorous camping" - "glamping" for short - would revolutionise the market. Although both the new ranges, which were exclusive to the group, sold well with Cath Kidston wigwams dotting campsites at all of the major summer festivals, their success was not enough to offset increased competition from online retailers, supermarkets and even Halfords, which have all muscled into Blacks' market.

Underlying sales fell 5.6 per cent at Millets in the 25 weeks to 19 August, more than wiping out a 4.1 per cent rise in like-for-like sales at Blacks, and dragging group sales on the same measure down by 0.4 per cent during the period. It warned the group would be barely profitable during its first half, after making £7m last year.

Analysts at Numis Securities slashed their pre-tax profit forecasts for the full year to £14.6m from £20.5m, warning "it will take a while to restore management credibility after this".