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The Investment Column: Harvey Nichols

IT OBVIOUSLY pays to be at the posh end of the retail market. Harvey Nichols, the department store group immortalised by Absolutely Fabulous, has proved to be one of the few retailers to shrug off the gloom inflicted by discounters on the high street. Its shares have outperformed the retail sector by 90 per cent this year.

Harvey Nichols says this is because its shoppers are, er, less "price sensitive" than most. Yesterday's results proved the point, even if they were more solid than unspectacular. Half-year profits were flat at pounds 6m, with like-for-like sales in the last nine weeks up by 1.4 per cent. Sales growth has accelerated in the past month, the company says, which makes the share price fall to 179p yesterday look odd.

The lack of discounting, together with supply chain efficiencies, saw margins increase by 0.8 percentage points. The figure was also helped by a greater contribution from the higher margin restaurant business.

The group's Leeds store raised its contribution to profits, and a new pounds 20m store will open in Edinburgh in 2002. Stores are planned for either Manchester or Newcastle, although sites have yet to be identified. Harvey Nichols is even starting to dabble overseas with its first international licensed store, scheduled to open in Saudi Arabia.

Going forward, much will depend on whether the company can continue to stand above the discount battle. On analysts' full-year profit forecasts of pounds 14m the shares trade on an inexpensive forward p/e of 10. But after such a good run there seems little point in chasing them now.