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The Investment Column: Tough times for Tie Rack

It has been a tough few months for Tie Rack, the specialist retailer run by the ever-exuberant Roy Bishko. From a recent high of 203.5p in April the shares have been drifting down steadily as fears over the impact of the strong pound begin to take root.

Yesterday the shares fell a further 4.5p to 127p as the company confirmed the currency damage to its half-year results. Though underlying profits were up on the same period last year, the pre-tax figure in the six months to 17 August slumped from pounds 604,000 to just pounds 158,000. The currency hit to profit translation was pounds 500,000.

Then there was uncertainty caused by the surprise management changes which will see Nigel McGinley step down as chief executive to be replaced by two joint managing directors who have been promoted internally.

At the trading level, like-for-like sales were more or less flat in the first half and similar in current trading. The new joint venture in Japan broke even and the Knot Shop acquisition in the US offers the group the opportunity to sell branded ties in that format while concentrating on own-label in Tie Rack.

A programme to refurbish the 419-strong store portfolio is set to start though the company declined to put a cost on it yesterday. The company may also expand the Knot Shop format overseas. On expected full-year profits of pounds 8.8m, Tie Rack shares trade on a forward multiple of 12. Quite cheap for a well-managed company, though one increasingly dominated by Mr Bishko. Much depends on the future strength of sterling and how the new management team can prove themselves. Worth holding.