The investment column: Storehouse needs to do more

Storehouse, the Bhs and Mothercare retailer, has taken a terrible pounding in the City in the last year or so. With analysts questioning the group's ability to increase sales, the shares have halved between early 1996 and this summer.

Though they have since staged a recovery of sorts they have still underperformed the market by more than 26 per cent in the last year.

The main problem has been the sales line, and yesterday's half year figures did little to reassure the company's doubters. Though retail profits were up by nearly 8 per cent to pounds 40m in the six months to 11 October, same- store sales were up by just 1.3 per cent at Bhs and at 1.9 per cent at Mothercare.

In current trading, group sales in the five weeks since the end of the half year are ahead by 9.4 per cent on the same period last year on margins that have edged ahead.

That looks fine but when new space is stripped out analysts estimate the underlying growth to be only 1.5-2 per cent. Given the higher depreciation charges and interest costs in the second half, Storehouse will have to do a bit better than that if profits are to be driven forward.

To be fair to management, they are operating in difficult markets. The childrenswear market has been badly affected by the growing popularity of branded sportswear affecting both Mothercare and Bhs. The acquisition of Children's World from Boots last year has given Storehouse an out-of- town alternative. The stores are being converted to the Mothercare World format with pounds 24m earmarked to upgrade 15 of the stores.

At Bhs Storehouse is concentrating on improving product and the store environments but analysts are worried that the move to offering more value lines will take the stores into even more competitive territory.

The City view is that Storehouse will need a very good Christmas to achieve the pounds 127m full year forecasts many have pencilled in. On yesterday's closing price of 235.5p, up 0.5p yesterday, that puts the stock on a lowly rating of less than 11. Cheap, but the company will probably need a couple of good trading statements before a re-rating is achieved. Not worth chasing yet.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
News
people
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all