Developing picture for Jessops as shares surge

Published on Tuesday 24 March 2009 20:34

INVESTORS snapped up shares in Jessops yesterday as the struggling camera chain reported robust trading and insisted it could afford to pay its quarterly rent bill.

The group, which has been closing stores and shedding jobs in the face of stiff competition and a consumer slowdown, said it continued to have "good relationships" with suppliers and landlords.

In a trading update to coincide with its annual shareholder meeting, Jessops said like-for-like sales since 25 January were down by just 1 per cent. That compares to a fall of 8.3 per cent in the same period in 2008.

Sales for the 24 weeks to 15 March were down 3.5 per cent, the group added, against a 5.5 per cent drop the previous year.

Jessops has been the subject of speculation since January when it disclosed full-year losses of almost 50 million.

Recent reports have suggested that the firm may struggle to pay large lump-sum payments to landlords.

Today is quarterly rent payment day for many UK retailers and the equivalent day in December triggered a flurry of business failures in the sector.

However, Jessops chairman David Adams told shareholders that rental commitments due this week "will be met".

The group said gross margin had held up since Christmas – at 27.3 per cent for the 22 weeks to 1 March, compared to 30 per cent in 2008 – a "good performance" as it included the traditional January sale period.

Jessops is working with its advisers and lender HSBC to put the business on a more stable footing, but it has warned the exercise could involve a fundamental restructuring of its debt, which stood at 57.4m at the end of September. Adams yesterday confirmed that those talks with HSBC "are ongoing".

Shares in Jessops, which have plummeted over the past year, rallied 1.2p, or 69 per cent, to close at 2.95p.

Last month, the Leicester-based retailer said it was closing 17 stores across the UK, the majority of them in Scotland. The move will leave Jessops with some 210 stores in the UK.

The British Retail Consortium (BRC) yesterday warned of the "toughest quarterly rents payments day for at least 18 years" and urged landlords to show "more flexibility".

BRC director general Stephen Robertson said: "A thriving retail sector is essential for the health of landlords and the wider UK economy.

"Boarded up shops are becoming commonplace. An unrealistic payments regime can only increase the pressure on hard-pressed retailers and the jobs they support."

Insolvency expert Begbies Traynor yesterday warned Britain's retail sector is likely to suffer a further wave of business failures in the second quarter of the year.

The firm said its survey for the period from December to February showed retail companies with critical problems increased by an average 22 per cent, while actual insolvencies showed an average 19 per cent increase.