A spokesman for the company said that its cash flow had been hit due to its inability to release itself from lease obligations on 20 of the 55 retailing outlets it no longer needs after it pulled out of jewellery retailing last April.
He said: "It is on the brink of bankruptcy. You have the profitable business, Foothold, which is being hindered by the unprofitable business it is trying to close down."
He added: "But I wouldn't assume they will go into receivership - yet."
The company, whose shares on the London Stock Exchange were suspended yesterday at 16p, said that the closure of its jewellery retail business, originally given a provision of pounds 2m, had cost more than expected.
A spokesman said that the company's sports and leisure footwear retail business, Foothold, had like-for-like sales to date 4 per cent up against last year but sales in the 38 stores acquired in October 1994 had been progressing at a rate below the directors' expectations due to a shortage of stock and working capital.
As a result of these factors, the company was currently in discussions with its bankers and talks were also taking place with a third party, which may result in the third party acquiring the company together with its bank debts.
A further announcement would be made once the result of these discussions and their implications for the company and its shareholders had been clarified.
Separately, shares in House of Fraser fell 6p to close yesterday at 139p on talk of a downgrade in profit forecasts from the US broker Morgan Stanley. Dealers said the brokerage had cut its pre-tax profit estimates by pounds 3m to pounds 33m for the current year and by pounds 4m to pounds 44m for 1996. The cuts were believed to reflect a worse-than-expected first half and continuing weakness in clothing sales.Reuse content