The Investment Column: Retail relief from Arcadia

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The Independent Online
Retail relief from Arcadia

THINGS have got so bad in the clothing retail sector that any results announcement that does not include a warning on trading is greeted with relief all round and a bounce in the share price. Such was the case yesterday with Arcadia, the former Burton business which demerged from Debenhams in January.

Its shares jumped 32p to 469.5p on first half profits up 21 per cent to pounds 50m and news that current trading is satisfactory. This completes a good week for the two demerged Burton businesses after Debenhams also reported strong first half results earlier this week.

Not that everyone in the City is completely happy with Arcadia's figures. The company has changed the way it presents its results. It no longer includes figures on like-for-like sales and has stopped breaking down the sales and profits performances of the individual formats, such as Principles, Top Man and Dorothy Perkins.

This suits the company, it says, because such information could be commercially sensitive. It also means the prying eyes of the City and the Press cannot see if any of the formats has fallen on hard times.

What we are given instead is retail sales densities which show a 6.3 per cent increase on the year. Slightly more worrying however is the slight dip in gross margin caused by higher mark-downs. After the wettest April in living memory there could be more price-cutting to come if the sun does not start shining soon.

John Hoerner, Arcadia's chief executive, is a canny operator and his plans to shuffle the portfolio with more Racing Green and Hawkshead shops are only at an early stage.

However the shares already look up with events after a strong run in January and February which saw them rise from the 330p mark to 508p. Assuming profits of pounds 182m in the full year, the shares trade on a forward rating of 15. That is a discount to the market but given the difficulties in the clothing sector at the moment it seems high enough.