Liberty plunges by 20% after shock profits warning

Shares in Liberty, the luxury department store, plunged more than 20 per cent yesterday after the group warned that profits this year would be "substantially lower" than market expectations and said it would not be paying a final dividend to shareholders.

The 122-year-old fashion retailer, whose Regent Street store is among London's most famous shopping sites, said sales in the year to 31 January had been affected by unseasonable weather and the strength of the pound, which cut tourist spending. The shares fell 70p on the news, to 250p.

Liberty added that increasing costs together with disappointing sales had resulted in poorer trading profits in each of the last six months than during the previous year. The decline in profits had worsened significantly in January.

The surprise warning follows a bitter, three-month long battle for control of the store. Elizabeth Stewart-Liberty, a family member and shareholder, requisitioned an extraordinary shareholders meeting in an attempt to oust the chairman Denis Cassidy and appoint Brian Myerson and Odile Griffith, financial adviser to the Stewart-Liberty family, to the board.

Mr Cassidy was removed and its board of directors and advisors resigned. Liberty subsequently pulled out of talks with other bidders. The company last month named Philip Bowman as new chairman, and is searching for a managing director and finance director.

Liberty said it would halt all development work on its flagship store, although the financial burden resulting from work already completed would continue to hit earnings. A pounds 43m plan to redesign the store was the focus of the boardroom coup.

"Unfortunately, very substantial expenditure has already been incurred and regardless of decisions ultimately taken by the board further significant costs are unavoidable given pre-existing commitments," the group added.

After a pounds 16.6m loss in 1996, Liberty returned to profit in 1997. The group said its priority now is to strengthen the board by appointing further non-executive directors, a managing director and finance director, and completing "a rigorous evaluation of the company's strategic options".