The Investment Column: House of Fraser

LIFE IS tough out there on the high street and House of Fraser provided further evidence of the gloom yesterday. Half-year figures at the department store retailer were not a pretty sight. Operating losses increased from pounds 2.8m to pounds 4m and underlying sales fell 2.4 per cent. Current trading is even worse - same store sales are down 5 per cent.

No wonder the City is nervous about HoF's plans for the pounds 172m proceeds of its sale and leaseback property deal with British Land. HoF says it is reviewing its options. It has been linked with a takeover of Allders, its rival; HoF has not denied being interested. It will be interesting to see whether the Takeover Panel continues to allow it to get away with its vague statements so far on the subject.

Whether HoF's management would have the necessary credibility to push ahead with a deal is also open to question. Allders could, in any case, become more expensive as a result of its current property revaluation. And with trading so difficult this is not the time for management to saddle itself with an expensive distraction.

The priority must be to improve the existing store portfolio. John Coleman, chief executive, is targeting pounds 70m for store refurbishment - though whether DH Evans is really worth saving is a moot point.

He is also continuing to invest in fashion lines where sales have been strong and where margins have been improving for the third year running. Market share is also on the up.

Home furnishings is more of a worry, though Mr Coleman says a 5 per cent decline is in line with the sector and does not indicate any loss of market share.

The shares, down 0.5p at 80.5p, stand at less than half the 180p issue price five years ago, having underperformed the market by 75 per cent in that period. On Morgan Stanley's full- year profit forecast of pounds 20m, the stock trades on a forward rating of 13. This has never been one to chase and now is not the time to start.