Hamleys fears a difficult run-up to Christmas

Hamleys, the beleaguered toy retailer, yesterday warned that achieving a strong performance over the crucial Christmas period would prove "a significant challenge" as it scraped in with a first-half profit of £9,000.

Hamleys, the beleaguered toy retailer, yesterday warned that achieving a strong performance over the crucial Christmas period would prove "a significant challenge" as it scraped in with a first-half profit of £9,000.

The company, which has issued four profit warnings in the past two years, said the threat of renewed fuel protests together with a dearth of popular product ranges had made it "cautious" about its outlook for the three-month festive period, which traditionally accounts for about 40 per cent of group turnover. Analysts scaled back their full-year forecasts to £4m from £4.5m.

Simon Burke, Hamleys' chairman, said: "If another fuel crisis takes place, as has been threatened, later this month, it would be disastrous across the whole retail sector.... It is not just inconvenient, but it dents people's economic confidence." He estimated that the first round of petrol blockades, in September, had wiped around 15 per cent off sales at the toy company's flagship store in Regent Street, London, and a further 40 per cent off turnover at the group's out-of-town Toy Stack outlets.

Mr Burke said the absence of a top-selling range of merchandise, to replace last year's craze for Star Wars and Who Wants to Be a Millionaire? products, was another worry. "This year, there is no really winning toy which is captivating people, so we are trying to match figures without that benefit." Other factors, such as a drop in the number of tourists visiting the UK because of the relative strength of the pound, and "wider retail malaise", have cast a continuing cloud over the business.

But there was some brighter news. The slim pre-tax profits for the 26 weeks to 23 September marked a turnaround compared to the £2.6m loss the previous year. The recovery was achieved by a combination of improved margins and reduced operating costs. The group's average transaction value rose by 10 per cent in the period as a result of changes to its product mix.

Hamleys made no mention of the earlier talks to take the group private, which collapsed just a week after they were announced in June. The predator was widely reported to be Charterhouse Development Capital, which had hoped to retain Mr Burke to lead the management buyout. Richard Ratner, an analyst at Seymour Pierce, said: "There is still an outside chance that someone could bid for the business again."