The Investment Column: Allders shares look like a bargin

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It has been a good year for the new, slim-look Allders. Shorn of the duty-free operation sold to Swiss Air last summer, the department store retailer has started to look a simpler and more attractive investment. As a result, the City has begun to re-rate the shares, which have risen from 178p at the beginning of the year to 237p, up 8p yesterday. And on the evidence of yesterday's full-year figures and an upbeat trading statement, the re-rating has a way to go yet.

Operating profits on continuing businesses rose 59 per cent to pounds 18.8m, excluding the exceptional gain from the duty free sale in last year's numbers. Like-for-like sales, which were ahead by 12 per cent in the year, have remained strong in current trading, running 9 per cent higher. With a focus on home furnishings, the strengthening housing market has helped Allders. Its sales of furniture and beds, for example, rose 30 per cent on the year before.

Allders was tripped up in the recession by over-exposure in the South- east, but this has been rectified with the acquisition of eight Owen Owen stores for pounds 23m last year.

Sales densities and margins have increased sharply and there is more to go for. The seven Maples stores acquired from the receivers for pounds 3.8m in September have already been re-branded under the Allders and Allders at Home facias.

In the department stores, Allders wants to increase the penetration of higher margin, own-brand ranges from 7 per cent of group sales to 20 per cent. Its in-house fashion label will be extended to all branches in the spring and a more classic fashion label will follow in the summer.

On forecast profits of pounds 25m, the shares trade on a forward rating of just 11, a huge discount to the sector. Buy.