Green's Bhs reports fall in sales and profits

Published on Thursday 13 October 2005 02:01

RETAIL magnate Philip Green's flagship department store chain, Bhs, yesterday posted a disappointing 3 per cent fall in full-year like-for-like sales - embarrassingly a day after his former bid target Marks & Spencer confirmed a sales recovery.

Green, whose 9 billion bid approach for M&S foundered last year, did not pay himself or minority shareholders a dividend from Bhs as a result of the sales fall.

That was in sharp contrast to the 200 million dividend paid out by the group last year.

Bhs's lacklustre sales performance followed M&S reporting its first overall sales rise in eight quarters on Tuesday, including a sharp deceleration in sales falls in clothing and homewares in its second trading quarter to just 0.2 per cent. That compared with a slide of 11.2 per cent in the first quarter. It led M&S's shares to bounce briefly above 400p, a symbolic level as it was the price at which Green pitched his bid approach.

But Green, who according to one report yesterday, sent M&S chief executive Stuart Rose a congratulatory text message following his rival's better results, said Bhs's performance had been "credible" in what was a tough market.

Green said: "The middle-market [mid-range retailers as opposed to discounters and luxury stores] continues to be challenging, turnover being down 4 per cent in the year to date."

He said the good news was that "Bhs has a very loyal customer base that looks for a premium value offer, which we continually work to deliver".

Bhs's total sales were flat at 889.2m in the 53 weeks ended 2 April - a financial year that was a week longer than the comparable 2003-4 period. Operating profit fell 5.8 per cent to 105m.

The group said it had spent 20m on refurbishment and opening new stores this calendar year.

It has acquired and opened 12 new outlets this year. Of those, eight are trading out of town under the British Home Stores brand (the predecessor to Bhs before a revamp under previous management in the 1980s).

Green said the first of the full refurbishments, in Chichester, would be finished on 10 November, and a further seven would be done after Christmas.

It was a mixed picture on profit margins, an area where Green is widely thought of as highly effective, both on cutting unnecessary waste and getting good deals from suppliers.

Bhs's gross margin before tax was up 1.2 percentage points. But the operating margin slipped 0.7 percentage points. More positively, net debt fell from 113m to 92.7m.

The latest figures came as Bhs said Beverley Churchill, formerly marketing director at upmarket department store Selfridges, had been recruited to the corresponding position at Bhs.

City analysts said yesterday it looked increasingly unlikely, given the latest turn of events, that Green would consider making a new approach for M&S.