The Investment Column: Allders

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The Independent Online
ALLDERS, THE department store group, is not the most exciting of retailers but it has had an action-packed few months. Merger talks with House of Fraser collapsed in October as the City forced HoF's share price into the abyss.

At the same time it emerged Allders was in talks with Minerva, the property group, over plans to redevelop its flagship store in Croydon.

Its chief executive, Harvey Lipsith, yesterday said the group remains open to merger talks, as he unveiled a slump in full-year profits from pounds 19.4m to pounds 14.6m. Indeed, he says the department store sector needs consolidation to improve buying power and cut costs. He did not rule out further talks with House of Fraser.

Given all this, what value should the market be placing on Allders? There was good news on trading yesterday with a 4.6 per cent drop in like-for- like sales in the full year, improving to a 3.2 per cent increase in current trading. This was helped by shifting the balance of sales towards fashion ranges and away from heavy goods such as furniture and carpets. The performance would have been even better had it not been for the opening of the huge Bluewater shopping mall in Kent, which Allders estimates knocked 2 per cent from the like-for-like figures.

The shares have been underpinned by a property revaluation which has valued the portfolio at pounds 85m or 109p per share. This compares with yesterday's share price of 136.5p, down 6p on the day. It also excludes any benefit from the Croydon plan, which could see Allders sell its flagship store for development while leasing a new store in an extended new shopping centre instead.

Retailing may be a dog of a sector right now but assuming current year profits of pounds 14m, the shares trade on a forward multiple of 12 and yield 6 per cent. A solid hold.