Warm weather hits Austin Reed

Austin Reed, the upmarket high street fashion chain, yesterday warned that its profits would crash this year as unseasonably warm weather and a drop in consumer spending hit sales.

The company said last month when it posted half-year results that sales in the first eight weeks of its second half were down 6 per cent on a like-for-like basis. Since then, trading conditions have deteriorated; in the first 15 weeks to 22 November, like-for-like sales were down 11.7 per cent.

"At this stage, we consider it unlikely that the recent sales decline will be reversed," the company said.

Austin Reed also warned that its margins would be lower in the second half as it embarked on sales and other promotional activity to shift stock.

Analysts believe Austin Reed's profits could take as much as a 73 per cent hit, down to £1.5m for the year from an expected £5.5m.

Shares closed down 8 per cent at 136.5p, having fallen as low as 127.5p during the day.

The gloomy news from Austin Reed and its chief executive, Roger Jennings, adds to a malaise creeping over the high street. Marks & Spencer, French Connection and Next have all recently been downgraded by analysts after the Bank of England raised interest rates to curb spending.

"November hasn't just been soft for clothing, it appears to have been awful," Richard Ratner at Seymour Pierce said yesterday. He expects many more high street retailers to put out similar news. "This weekend is the crucial time for pick-up. If there is not, then there is a danger of retailers going on 'full sale' pre-Christmas."

But while high street outlets are seeing sales dwindle, sales of clothes through supermarkets have been strong. Tesco this week announced a new clothing range after reporting a 34 per cent increase in sales. Sainsbury's and Safeway are also in the process of beefing up their clothes ranges.

"There cannot be much crossover between Austin Reed and George at Asda, but neither is there zero crossover." said David Stoddart, an analyst at Teather & Greenwood. "The supermarkets are taking market share off the traditional high street retailers. There is overcapacity in the clothing sector and as the supermarkets eat away at prices at one end, the higher end of the market also has to move downward and change its price/value perception."

Austin Reed, however, does seem to be taking a harder hit than others. The poor news yesterday renewed speculation that the company may receive a takeover approach.