Moss Bros sells Hugo Boss franchise

Loss-making menswear retailer Moss Bros said the money raised from selling the outlets back to Hugo Boss would help bankroll its own ongoing turnaround plan.

The group, which has 155 stores in the UK and Ireland, added that its simultaneous costcutting efforts were paying off, with improved gross margins, as it also revealed buoyant second half trading despite the December snow disruption.

Moss Bros said sales at stores open over a year increased 7 per cent over the 26 weeks to 29 January and were up 9.1 per cent for the year to the same date.

Shares in the group rose as much as 14.7 per cent as it said the money from the Hugo Boss deal would enable it to operate debt-free and invest in the development of its 120 store Moss chain, Moss Bespoke and the suit hire business. The stock later closed up 3.3p, or 14 per cent, at 27p .

Brian Brick, Moss Bros's chief executive, said: "This is a transformational deal for Moss Bros and absolutely in line with our recently developed strategy of focusing on growing our own brands.

"Having restored the quality of the product offering of the core Moss Bros business and established a strong momentum in positive like-for-like sales, this transaction will give us the opportunity to focus exclusively on investing and developing the brands which we own, from a position of operational and financial strength."

Moss Bros, which also trades as Savoy Taylors Guild and Cecil Gee, has run Hugo Boss stores under franchise since 1995. The group said it will continue to maintain a wholesale relationship with the chain and stock the label in certain Moss Bros and Cecil Gee stores.

Moss Bros previously posted interim pre-tax losses deepening to 3.3 million from 3m a year earlier. Andrew Wade, retailing specialist at broker Numis, said: "While the (Hugo Boss] transaction pushes out profitability for another year, we believe management is continuing to make the right moves strategically and operationally."

Wade forecasts Moss Bros will make a pre-tax loss of 3.2m in the year to end-January 2011.

Hugo Boss said the acquisition extended its brand control in one of its key European markets, raising the number of directly operated stores in the UK to 35.

l Supermarket giant Morrisons yesterday stonewalled on reports that it is in secret talks with fashion icon George Davies about launching a clothing range. Davies launched Next and was also behind the Per Una brand at Marks & Spencer.

Tom Gadsby, a retail analyst with broker Matrix, said: "A serious move into non-food should help (stock market) sentiment for Morrisons as some believe the company has missed out by not moving into non-food sooner. George Davies would be an excellent hire."

A spokesman for Morrisons declined to comment.