Sears predicts continuing recovery: Retail group reports pounds 138m profit and plays down fears that tax rises will halt increase in sales

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GEOFFREY Maitland Smith, chairman of the Sears retail chain, yesterday played down fears that the tax rises hitting pay packets will kill the retail recovery.

Many other retailers have warned that rises in income tax and the imposition of VAT on fuel, which take effect this month, could reduce consumers' spending. But Mr Maitland Smith said: 'Whilst these are likely to be dampening in their effect, I do not believe that they will be as adverse as has been generally predicted.'

'I think people are still very cautious and quite conservative in their spending,' added Liam Strong, Sears' chief executive, 'but I don't see the tax increases making it any worse.'

Sears reported a pounds 138.3m profit for the year to 31 January, following a pounds 47.8m loss a year earlier, on sales up 3.8 per cent at pounds 2bn. The turnaround was largely due to an absence of one-off charges. The underlying results were below City expectations and the shares dropped 8.5p to 123p.

The group estimated that underlying profits rose by 23 per cent, after adjusting for a pounds 30m charge for restructuring of the British Shoe Corporation and pounds 106.8m losses on discontinued businesses suffered in the previous year. Last year, the group enjoyed a pounds 13.9m profit on the sale of its stakes in Asprey, the jeweller, and Satellite Information Services, the television company.

The best performance came from the shoe chain, where profits more than doubled to pounds 33.7m. The group is in the process of converting its Freeman Hardy Willis and Saxone outlets to Shoe Express, a self-service format, a process expected to take another two years.

The high-street chains, which include Wallis, Miss Selfridge ladies' fashion and Adams childrenswear, increased profits from pounds 29.9m to pounds 30.7m. Mr Strong said profits in the second half grew by 13.1 per cent as Olympus and Millets returned to profits and Richards, the fashion chain acquired in 1992, achieved a 'significant turnaround'.

Freemans, the catalogue business, made pounds 30.8m after a pounds 5.5m charge for closing its Dutch business, an underlying increase of 20 per cent.

Earnings per share were 6.8p compared with a 4.6p loss, although the group estimates the increase was 31.1 per cent after adjusting for the one-off charges.

The dividend is increased by 5.1 per cent to 3.68p via a 2.68p (2.5p) final.

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