Austin Reed shares soar on news of fresh bid talks

Austin Reed, the fashion retailer, yesterday revealed it is in fresh talks that could lead to an offer for the company. Austin Reed rejected an unsolicited bid approach in February but said yesterday that it was now in "preliminary discussions" regarding a possible bid.

Austin Reed, the fashion retailer, yesterday revealed it is in fresh talks that could lead to an offer for the company. Austin Reed rejected an unsolicited bid approach in February but said yesterday that it was now in "preliminary discussions" regarding a possible bid.

Analysts speculated the bidder could be a trade buyer. One candidate is Hartmarx, a US clothing group that used to have a stake in Austin Reed. Another is Malayan United, a Malaysian group which owns a large stake in Laura Ashley. Austin Reed shares rose 23 per cent to 104.5p on the news, valuing the company at £32.8m.

"I think the current share price probably undervalues the business," said Brian Rayner, retail analyst at Peel Hunt. "Austin Reed has good trading names and there are signs that things are starting to improve."

The comments came as Austin Reed reported flat underlying profits of £6.5m with suit sales depressed by the trend towards casual office dress codes.

The company said suit sales have been declining and account for just 12 per cent of group sales. Instead, Austin Reed has been promoting its Reed casualwear brand and its Sport label. Colin Evans, Austin Reed chairman, said: "Men need help in this field so we have been putting certain 'looks' together."

Group profits fell from £7m to £2m after £4.5m of exceptional charges related to the closure of its shirt-manufacturing business. Like-for-like sales fell 2 per cent last year, though margins improved.

Current trading is better with underlying sales up by 7 per cent in the first eight weeks of this year. The company said its acquisition of Country Casuals, the women's clothing chain, had made it less reliant on the difficult menswear market.