Albemarle & Bond yesterday said customers were running out of jewellery to leave in hock.
Profits at the chain slid by a third in the six months to December after the high street gold rush that financed its recent expansion dried up.
The group estimates there are more than ten million “cash and credit constrained consumers” in the UK, but it is facing fierce competition from pay-day loan companies offering short-term lending. It vowed to take them on by accepting a wider range of items as security and continuing to roll out its own unsecured lending services.
It said: “The demand for short-term cash in the wider market has never been greater but, with the reduction in gold jewellery for our traditional customers to pawn and sell, our objective is to reach out to growing customer segments and help all customers find other fast, affordable and convenient cash solutions.”
It plans to accept diamonds and other precious stones, watches and mobile phones as security at its pawnbrokers’ shops.
Reporting half-year profits of £8.1 million, down 33 per cent on the same period in 2011, the firm said the gold buying part of its business had peaked in March and was expected to carry on reducing.
Albemarle & Bond used the cash it made during the exceptional times following the credit crunch to add 68 stores, taking its estate to more than 200 outlets.
It also bought a loans company, Early Pay Day Loans, which it said was now fully integrated into the business and was developing unsecured lending products. It said it was rolling out its financial services offering to dozens of smaller “pop-up” gold buying stores launched to tap into the gold rush of recent years.
It expects to offer pay-day loans at all its shops and pop-up stores by the summer, and is planning to pilot a multichannel “click and collect” proposition later in 2013.
The firm will also continue to expand its estate, but at a lower rate and concentrating on “selective, well located acquisitions”.
Despite the fall in profits being well flagged in advance, shares in Albemarle were under pressure following the update.
Mark Williamson, an analyst at Peel Hunt, said: “The situation at Albemarle is not getting any brighter, with competitive pressures seemingly resulting in no growth in the pawn book while plans to expand un-secured lending are set to increase credit risk and reduce quality of earnings.
“Despite the precipitous decline in the share price [in the last year] I would continue to recommend selling Albemarle, which remains far from cheap.”
However, Michael O’Brien at Canaccord Genuity rates the shares as a “speculative buy”. He said Albemarle could be set to benefit from attempts to regulate the pay-day loan industry, which will squeeze out capacity and give it the opportunity to increase its market share.