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The Investment column: Burton still needs to build sales

John Hoerner, the amiable American who has turned around Burton, is fond of saying that just because the group's recovery is more or less complete, it does not mean that there is nothing left to play for. "This is not the beginning of the end, it is the end of the beginning," is the way he puts it. In a way his comments echo Archie Norman's "from recovery to breakout" slogan at Asda, another corporate basket case that has been successfully rejuvenated.

The Burton group has been stabilised for some time now with price-cutting a thing of the past and margins by and large restored. Though margins are still poor at Burton Menswear, Principles and Top Man, the challenge has moved on to building sales.

If the good run of Burton shares is to continue, however, Burton needs to improve turnover growth more than it has done.

This made yesterday's trading statement at Burton's AGM interesting reading. Total group sales in the 20 weeks to 18 January were 11.1 per cent ahead of the same period last year. Of this, 3.8 percentage points were contributed by the recent mail order acquisitions Innovations and Racing Green. Though no specific figure was issued on like-for-like sales increases, it is estimated at around 6.5 per cent.

While Christmas and new year trading was good in the womenswear multiples and in Debenhams, menswear sales were less impressive. Debenhams like- for-like sales were encouraging at 7.4 per cent but Burton sales were only slightly ahead.

Two new Debenhams stores have been added in Dublin and Lincoln and are performing in line with expectations. A further two outlets will open in the Leeds White Rose Centre and in Barrow in Furness in the spring.

There was more good news on margins with the gross figure up by a full percentage point. Costs are being held in line with earlier indications.

As a group Burton has only recently started to drive sales higher after a period between 1993 and 1995 when they went nowhere. Sales this year should be pounds 400m higher than two years ago.

The shares have had an extremely good run, rising from 51p in 1994 to 155p, though they showed a 6.75p drop yesterday as some investors took profits. Looking forward, Burton's mail order acquisitions look promising, though they are not expected to contribute to profits in the short term. Burton plans to have all its brands on catalogues over the next two years.

Added to this is the positive sentiment in the market, where the City believes in Mr Hoerner and is confident that he can finish the job he started. On full-year profit forecasts of pounds 185m the shares trade on a forward rating of 18. Not cheap but still worth holding.