Jessops suffers setback as digital boom ends

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The Independent Online

Jessops admitted yesterday that demand for digital cameras has dried up, forcing the photographic retailer to issue a profits warning just five months after floating on the stock market.

Jessops admitted yesterday that demand for digital cameras has dried up, forcing the photographic retailer to issue a profits warning just five months after floating on the stock market.

Investors punished the company, wiping £50m off its market valuation. Jessops' shares crashed 47.5p to 107p, well below the 155p issue price.

ABN Amro, Jessops' private-equity backers, had to slash the indicative range to secure a listing. The bank sold about £15m of shares at the time - less than it wanted to sell - leaving it with an 18 per cent stake.

Derek Hine, the chief executive, said digital camera sales were "very, very disappointing" during February and early March. "We have seen a significant slowdown," he said. "In seven years, I've never experienced six weeks like it." To compound Jessops' woes, it has had to cut the price of its digital cameras to compete with rival retailers, who have resorted to reducing prices to drive sales. This has hit Jessops' margins.

Six weeks after reporting like-for-like sales growth of 6 per cent, the group predicted underlying sales for its first half would edge just 1 per cent higher. It said it was "prudent" to cut its sales growth and margin expectations for the second half, which meant its full-year outcome was "likely to be significantly below its previous expectations".

Analysts slashed up to 30 per cent off their maiden profits forecasts. Seymour Pierce expected Jessops to report pre-tax profits of £15m, down from £20.3m.

Asked whether he felt the company was overvalued when it listed, Mr Hine said: "It's not for me to judge. But the share price has come off today."

Rhys Williams, at Seymour Pierce, said the warning would "shock the market over the extent of the consumer slowdown". He added: "If a company operating in one of the most sought-after product categories is failing to meet expectations, then we remain bearish on demand for less exciting retail offers."

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