BHS profits drop 54% over clothes 'mistakes'

Published on Friday 29 September 2006 00:50

PROFITS at retail magnate Philip Green's Bhs high street chain more than halved in the year to the end of April as Green acknowledged that mistakes had been made within the company's womenswear business.

Operating profits at the group slumped 54 per cent to 48.5 million from 105.2m last time, while overall sales fell nearly 2 per cent to 860m.

It means the Green family will receive no dividend from Bhs for the second year running.

Same-floorspace sales at Bhs slid 7 per cent, while operating profit margins crashed 6 percentage points because of big increases in mark-downs on clothes at the shops.

Green, who spends most of the year in Monaco, said: "The results for the last financial year are obviously disappointing.

"I stated at the end of last year that profits would be down significantly due to internal ranging mistakes, particularly in womenswear.

"This has resulted in significant increases in mark-down and therefore margin erosion."

Gross margins at Bhs were down 1.4 percentage points, but they have still grown by nearly 12 points since Green bought the business in May 2000.

The company said net debt had risen to 141.9m from 121.6m in the previous year, following the acquisition of 44m of freeholds.

Green, also owner of the Top Shop-to-Burtons Arcadia group of companies, said the market remained challenging, but added that Bhs had improved its range. This had led to year-to-date sales and margins rising 1 per cent and 2 per cent respectively on the previous year.

"Current trade has been encouraging, with the last seven weeks seeing total sales and margin 3 per cent above the year and like-for-like sales flat," Green said.

Bank of Scotland helped finance Green's takeover of Bhs in 2000, and retains an 8 per cent stake in Arcadia, for which the bank, part of the HBOS group, last year received a dividend of 100m. It is understood Bhs's difficulties have not changed BoS's commitment to the Arcadia business.

Arcadia, which last year paid Green a divi of 1.2bn, is due to report its results on 26 October.