Department store chain records “disappointing performance” in the first half, as like-for-like sales drop 9.2%.
The slide into loss was mainly attributable to the acquisition of 19 department stores in May, which resulted in an exceptional charge of £1.3m. Despite the knock to its balance sheet, the Beales board explained it views the acquisition of the stores as, “essential to the group’s strategy to achieve greater critical mass, to enable Beales to prosper in the modern retail environment and accelerate the restoration of profitability.”
However, even without acquisition costs, the group would have still recorded a pre-tax profit of £100,000 for the 26 weeks ended April 30, against a profit of £900,000 in the same period last year – a drop of around 89%.
Retail sales were hit badly by the snow over the Christmas period, hampered further by the VAT increase to 20% in January. The group also took the decision to focus on its margins, rather than sales volume, choosing not to repeat the 25% off ‘mega days’ seen in April 2010.
Beales, which now operates 32 stores across the UK, described its results as “disappointing”. Gross sales were up 3.3% for the 26-week period, while revenue, which includes own-bought sales and the commission received on concession sales, increased by 4% to £27.3m.
The retail chain’s net debt has increased from £6.66m to £7.87m since May 2010, impacted by the significant losses in H1 and the acquisitions of a department store in Rochdale and former Vergo Retail outlet, Robbs of Hexham at the end of last year. No dividend will be paid to shareholders again this year.
Looking ahead, Beales said in the trading statement that, “the slow pace of economic recovery and the pressure on household incomes, remains the principal risk and uncertainty facing the group”.