Outlook: Monsoon

MONSOON looked over-priced when it limped on to the stock market last year, and so it has proved. Shares in the women's fashion retailer have now lost three-quarters of their value since the float last February.

This company's many critics were plainly right to advise investors not to touch Monsoon with a barge-pole. The racy multiple attached to the shares suited no one, apart from Peter Simon, the group's Armani-clad founder, who netted a very handy pounds 85m from the float.

This was a company which had pulled a float plan before because of concerns about its ownership structure. Margins were already so high as to leave no room for improvement and the store opening programme looked over-ambitious.

The institutional investors who bought the sales pitch of Monsoon's advisers BT Alex. Brown, or NatWest Securities, as it then was, must be feeling very sore indeed. In the last year Monsoon has done nothing but disappoint. Its shares only ever rose above the issue price by a few pennies, giving shareholders no chance to book a profit. Monsoon's 12 year record of unbroken profits growth has gone already and the performance of the business is getting worse, not better.

Monsoon has compounded a generally ugly high street scene with its own mistakes. The result is that Monsoon's much vaunted margins have taken a pasting. The store opening programme continues, even though it is obvious that management has been distracted by over-expansion. The nuts and bolts of retailing, such as product quality and store presentation, seem to have been neglected.

Mr Simon thinks the market has been too hard on him, and bought back more stock last September, taking the total holding by directors to the maximum 75 per cent allowed. It would plainly make sense for him to buy the rest at these prices, but he'd be chased out of town if he even dared to attempt it. What is clear is that he should never have taken this company public.