Problems Storehouse can't shelve
The Investment Column
Friday 24 May 1996
It has built margins rather than chasing sales, kept the lid on costs and sorted out the nuts and bolts of the business, including reducing the number of suppliers and shortening lead times. Distribution costs have also been addressed and will fall by a further pounds 3m this year.
It is a similar strategy to that employed by John Hoerner at Burton which has also seen its fortunes improve. Storehouse shares have responded to the treatment, rising from around 200p at the time of Mr Edelman's appointment to yesterday's 327p. The 21 per cent hike in profits to pounds 110m shows that the fruits of his work are coming through.
But the City is already looking to the next stage. With margins re-built and store refurbishment progressing, management must now drive sales which have been flat for more than five years.
Like-for-like sales fell 2 per cent across the group last year, with sales in the main BhS and Mothercare chains down. Mothercare had a particularly weak second half on the back of a weak clothing range and problems with product availability. Even these uninspiring figures are flattered by another stellar performance from Storehouse's overseas stores. Even including new openings, the group's UK sales fell by more than 2-3 per cent last year.
Though management is saying that boosting sales is the priority, this will be no easy thing as advertising expenditure will be cut this year after the high spends of recent years. The company hopes store refurbishments and the gradual maturing of new openings will be enough to kick-start sales.
There is also much to do at Children's World, the out-of-town group acquired from Boots earlier this year for pounds 62.5m. Next year's accounts will include exceptional charges of pounds 16m-pounds 18m to cover the integration programme which will include the closure of the Nottingham head office in September and possibly the closure of some stores.
The store names will not automatically change to Mothercare, even though the company perceives it to be a stronger brand. Mothercare World is a possibility, though the re-branding will not start until next spring.
The overseas stores are going great guns, with franchise sales having increased by 29 per cent to pounds 78m.
BZW is forecasting profits of pounds 125m this year, which puts the shares on a forward rating of 16. They are no more than a hold and there is probably better value elsewhere.
- 1 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
- 2 Iain Duncan Smith's expenses credit card is suspended after he runs up £1,000 debt to taxpayer
- 3 German ethics council calls for incest between siblings to be legalised by Government
- 4 French woman dies in freak bungee jumping accident
- 5 Jennifer Garner and Ben Affleck to divorce and end their 10-year marriage
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
They are neither a 'state' nor 'Islamic': Why we shouldn't call them Isis, Isil or IS
Tunisia beach attack: How can British Muslims respond to the latest outrages?
iJobs Money & Business
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...