The Investment Column: No Christmas pick-up for Oasis

Fashion retailing is a cruel business. When you're hot the City loves you, but when you're not, the knives are out. Such is the misfortune of Oasis Stores, which until spring last year was one of the fashion retail darlings with a high rating and an excellent merchandise track record. But two profits warnings followed by yesterday's grim trading statement have hammered the shares down from 421.5p a year ago, to 124.5p yesterday, down a further 10.5p on the day.

Analysts were looking to yesterday's Christmas trading statement for news on whether Oasis's sales had picked up from their weak level in early December. Instead there was news of a continued decline, with sales in the eight weeks to 17 January down by 9 per cent on a like-for-like basis.

The crumb of comfort for shareholders is that the group claims that full- year profits will be in line with expectations. Even so, analysts edged down forecasts from pounds 11m to around pounds 10.25m for the year.

Investors are probably not impressed with management who sold shares at an average price of 400p before the first of last year's warnings. But they should not lose hope now.

At these levels Oasis shares are rated on a forward p/e of under 10. The balance sheet is strong, with cash in the bank. There is no evidence of a longer-term malaise, just a short-term problem created by buying mistakes. And the business is profitable. Oasis is no Laura Ashley.

In a sense, the shares may be now represent a good each-way bet. If management restores the group's fortunes the shares should recover and if they don't it will be a takeover target. Though the shares are likely to languish until there is more news on trading - the next results are in April - they look like a good recovery play with little downside.