Profits crash as IT error hits Hamleys profits

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The Independent Online
SHARES IN Hamleys slumped to an all-time low yesterday after the toy retailer revealed that an information technology blunder and lower tourist spending slashed first-half profits by half.

The owner of the landmark London shop in Regent Street warned that the first-half shortfall would not be made up in the second half. Several City analysts reduced their earnings forecasts for the current year.

Hamleys said that a catalogue of errors at Toystack - the chain of toy shops bought last year - caused a collapse in sales, pulling the division into a loss. Howard Dyer, the chairman, said the failure to merge Toystack's stock and merchandising system into Hamleys' led to a shortage of best- selling lines in the chain's outlets.

"We have messed it up. This resulted in the system not producing accurate information and misleading us as to the amount of stock there was in the stores," Mr Dyer said.

Toystack's problems were compounded by a weak market, leaving like-for- like sales 10 per cent down on a year ago. Mr Dyer said the system had been mended, but he added that sales were still sharply below last year.

No heads will roll as a result of the error. "We all take the blame and nobody has lost his job because of it," Mr Dyer said.

Hamleys' House of Toys outlets, operating inside Debenhams department stores, also suffered in the first half as difficult trading and poor weather depressed sales.

The Regent Street store, which claims to be "The Finest Toyshop in the World", was hit by a fall in tourist spending as the strong pound kept visitors away, Hamleys said. "It is noticeable that Japanese tourists weren't around as much as in past years," Mr Dyer said.

Overall, Hamleys posted a 49.5 per cent fall in pre-tax profits to pounds 656,000. Mr Dyer said the company would not be able to make up the lost ground in the second half as trading conditions remained tough.

The bearish statement sent the shares, already battered by two profits warnings earlier this year, down 12 per cent to 118.5p, their lowest since their flotation in 1994.

Analysts cut their full-year profit forecasts to around pounds 6.5m from pounds 7m. "They shot themselves in the foot with the Toystack problems, and this has been compounded by market weakness," said Brian Rayner at broker Peel Hunt.

Mr Dyer said that a turnaround in the second half hinged on Christmas trading. The company was ready to capitalise on Britain's latest yo-yo craze with a dedicated trading area in the Regent Street store. However, My Dyer warned that he was not expecting a bumper festive season. The company was ready to launch a price war in Toystack and House of Toys if rivals Woolworths and Argos cut prices, he said.