THE INVESTMENT COLUMN: Now Burton needs a follow-up to the Hoerner rescue story

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The Independent Online
No one can deny that the affable Texan John Hoerner has done a fantastic job in rescuing Burton from the basket case it was when he took over as chief executive five years ago. Mr Hoerner's textbook attack on stock and cost control and the clean up of the group's properties has made Burton's recovery second only to Next's in retail history.

The progress is reflected in some respectable half year results yesterday. Profits from retail, the main part of the business, rose a quarter to pounds 23m on underlying sales up 6.8 per cent. Compared to the struggles of Sears and Storehouse, Burton is definitely on the side of the angels.

As with all recovery stories, however, the question now is whether there is decent growth to follow - something Burton needs to justify its shares, down 9p at 145p, remaining on their high rating of 16 times 1997 earnings. Compared to Next, which is growing underlying sales at 12 per cent, Burton is lagging.

Next has an image which hits the spot with consumers. The concern is whether Burton brands are strong enough to sustain convincing growth, particularly as its strategy is to follow Next into the competitive game of direct mail order. Unlike agency mail order, which has a fairly down- market image, successful direct selling is all about brand.

There are few worries about the Debenhams department store chain, a major contributor to the figures. At the half year underlying sales - almost two-thirds of the group total - grew 9.4 per cent, with profits 24 per cent ahead at pounds 14m.

Opening nine new-generation Debenhams stores over the next four years - offering customers massages and the chance to have their nails done as they browse for clothes and cosmetics - should maintain the momentum. So will injecting products from recent acquisitions - the McCord mail order catalogue, a seller of stylish furniture, and Innovations, which offers all those gadgets you never knew you needed. A Debenhams catalogue, likely by the year-end, could do well.

However the outlook may be more mixed for the group's five multiple chains - Burton Menswear, Principles and Dorothy Perkins for women, Evans, the outsize womenswear shops, and teenybopper stores Top Shop and Top Man.

A worry is that in an attempt to improve its less strong brands, the catalogue businesses will suffer. Principles' arguably stuffy image hardly seems a natural fit with Racing Green's more relaxed style.

There are doubts whether Burton's name is attractive enough to sell Burton's suits and Principles' clothes by catalogue when cheap and cheerful companies like Freemans are around.

With BZW forecasting pounds 185m profits for the full year the shares are a hold.

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