Hamleys cuddles up to teddy bears

Hamleys, the toy retailer, is raising £3.3m to cut debts and pay for the £710,000 acquisition of The English Teddy Bear Company, which has four UK stores.

Hamleys currently has debts of £10.4m and gearing of 666 per cent due to the low level of shareholder funds. It is raising the money via a placing of 2.1 million new shares at 165.5p. This is a small discount to the 173p closing price on Tuesday.

Hamleys is buying The English Teddy Bear Company from the liquidators. The company collapsed after being hit hard by the post-11 September downturn.

The business recorded profits of £531,000 on sales of £2m in the year to August 2001. But profits collapsed to £223,000 the following year on sales of £1.6m. The company has stores in Regent Street (opposite Hamleys) and Piccadilly in London and shops in Bath and Cambridge.

The business was founded in 1991 and specialises in English handmade teddy bears and themed clothing such as T-shirts and sweatshirts.

Hamleys said the deal would complement its Bear Factory business which currently has 24 stores but that the two store chains would be run separately. Simon Burke, Hamleys' chairman, commented: "We will keep the name as it is a good brand and offers opportunities to sell direct from press adverts. We think there is scope for another 11 stores taking the total to 15."

The placing is expected to cut gearing to below 100 per cent by the end of the current year.

Peter Jones, a retail analyst, said the acquisition is "small, but neat, and I think it will enhance earnings next year. The stores could make £500,000 next year."

Like-for-like sales growth at the five Hamleys stores and online operation "continued at a similar level" to the 10 per cent gains reported for the 17 weeks to 20 July, the company said.

Mr Burke has been nursing Hamleys back to health with a store refurbishment programme and investment in an online service. The company has also grown its Bear Factory business where customers can have their own teddy bears made with their own talking message.

Hamleys shares closed down 0.5p at 173.5p yesterday.