Selfridges down ahead of flotation

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The Independent Online
SEARS, THE struggling retail group, is pressing ahead with its plans to demerge its Selfridges department store division, despite figures yesterday which showed a decline in current trading.

Selfridges' management admitted that the demerger was taking place at time of "maximum disruption" in the flagship store, which is still undergoing extensive refurbishment.

"There is no doubt that the timing is not perfect," said Vittorio Radice, chief executive of Selfridges. "But we are not raising any new money in the demerger and it is our major shareholders that are pushing for it."

Selfridges' figures showed that in the first 19 weeks of the year its sales were down by 4 per cent on the same period last year. It blamed a high level of discounting in the end-of-season sales and the refurbishment of the store.

Other factors included the strong pound and the Asian crisis which has affected tourist spending. "The Americans are still coming in but Asian business has definitely been hit," Mr Radice said.

Pro-forma figures for the year to January showed a trading profit of pounds 21m on sales of pounds 293.6m. The company said trading at its Oxford Street flagship store would continue to be affected by refurbishment until January next year.

His comments accompanied poor figures from Sears which said it would continue with plans to demerge its Freemans mail order business.

Freemans reported a slowdown in sales growth to 12 per cent in the first 19 weeks due to the strength of sterling and higher discounting.

At Sears clothing stores, which include Wallis and Miss Selfridge, sales were flat on last year though margins were better.

The demerger of Selfridges will be put to shareholders at its annual meeting on 17 July, with Selfridges shares expected to start trading on 20 July. Immediately prior to the demerger there will be a 1-for-10 share consolidation.

Tony Shiret, retail analyst at Credit Suisse First Boston, said Selfridges would be valued at around pounds 400m on demerger, worth around 25p per share (or 250p following the consolidation).

The rump of Sears would be worth 30p to 35p. Sears shares closed 4.75p lower at 56.75p.

The demerger follows the sell-off of Sears' British Shoe business, which has cost Sears about pounds 150m.

"Selfridges has a bright future and a separate listing will, we believe, provide the opportunity to create further value," chairman Sir Bob Reid said in a statement.