Selfridges posts 8% rise in profits as sales level out

Selfridges has shrugged off the impact of the closure of the Tube's Central Line and the congestion charge in central London to record a solid performance at its flagship Oxford Street store.

Reporting an 8 per cent increase in full-year profits to £40.7m, the department store group said sales at its Oxford Street store in the six weeks to 15 March were unchanged on the same period last year. This compares with a 12 per cent fall in sales at John Lewis's Oxford Street branch.

"To be level in Oxford Street is an excellent outcome, all things considered, since a fall of 6 per cent to 7 per cent would have surprised no one," Nick Bubb, a retail analyst at Evolution Beeson Gregory, said.

The new chief executive, Peter Williams, said exclusive ranges such as a new lingerie collection endorsed by Kylie Minogue had helped but admitted that trade at the busy London thoroughfare had been affected.

"We are definitely seeing an impact though it is hard to quantify," Mr Williams said. "It is noticeable that the evening trade is down."

Mr Williams, who took over from Vittorio Radice earlier this year, confirmed that Selfridges would consider mortgaging the Oxford Street site where it owns the freehold. This is currently valued at £258m but is likely to be worth much more at the next valuation in January 2004. "We recognise that our existing capital structure is not efficient," Mr Williams said. However, the company wants to wait until it has secured sites for new stores in Leeds, Bristol and Newcastle before gearing up its balance sheet.

"We expect the debate on exploitation of the asset base will now rage more fiercely than ever," Merrill Lynch said in a research note.

Selfridges said the insurance costs on its London store would rise by another £600,000 this year to £2.5m, after an increase of £1.5m last year. This kept the store's profits flat at £68m.

The Trafford Centre branch increased profits by 4.4 per cent to £7.1m in the year. The Exchange Square store in central Manchester made a maiden contribution of £0.9m following its opening on 6 September.

A fourth store is due to open in Birmingham in September and a site has been agreed in Glasgow as the group tries to reduce its dependence on the capital.

The London store is due to stage a Body Craze promotion in May where customers will be able to get tattoos, ear piercing and massages. A superbrands departments is due to open later this year, featuring fashion from top designers such as Alexander McQueen and Stella McCartney.

Asked what part Selfridges might play in the possible consolidation of the department store sector, Mr Williams said: "I don't see us as a bidder. But if a site came up around the M25 we could well be interested."

He said he was enjoying his new role after Mr Radice left to join Marks & Spencer. "It's the most fantastic job in retail," he said.

The group's shares rose 8.5p to 227p.