Alexon Group saw pre-tax profits before exceptional items fall 79% to £3.5 million for the 53 weeks to January 31 after young fashion chain Bay Trading put in an abysmal performance.
Alexon Group like-for-like sales slid 9.1% over the period, with total sales dropping 4.5% to £250.3m.
Pre-tax losses after exceptional items were £27.7m against a profit of £12m the previous year. Alexon said that two main exceptional items included an impairment of goodwill charge of £11.8m, which related directly to the losses at Bay Trading, and onerous lease provisions, which related to property charges on exiting leases.
Overall profits were in line with market expectations.
“Bay Trading losses reflect intense and growing competition in the value sector and underline the requirement for brand repositioning.”
Alexon chief executive Jane McNally
Alexon said that Bay Trading, which posted an operating loss of £7.2m against a profit of £1.1m the previous year, had been hit by increased competition. Like-for-likes at Bay Trading also slipped 16% and margin was 1.1 percentage points lower.
Alexon said that while it had taken action to improve trading at Bay Trading by repositioning the brand away from its value positioning and towards more directional product, forecasting its future results was difficult.
In a statement Alexon said: “…were the Bay Trading business to continue to significantly underperform the group may need to take further action. Such action might include a fundamental restructuring of the Bay Trading business to significantly reduce the cost base and to ensure that the group as a whole is able to remain within its financial facilities.”
A “restructuring” could see the offloading of loss-making stores. Bay Trading trades from a separate company to the group, called Epcoscan.
Separately Alexon said that it was pleased with performance at its Dash and Minuet brands, while Kaliko and Alex & Co showed a small recovery after a tough year. Eastex performed in line with host stores. Ann Harvey was hit by high markdowns because of stock clearance and range issues.
Alexon Group chief executive Jane McNally said: “2008 was a challenging year for the sector, but I am pleased that the core Alexon Brands have delivered a resilient performance in the economic climate. Bay Trading losses reflect intense and growing competition in the value sector and underline the requirement for brand repositioning.”
She added: “The turnaround will take time, especially given the difficult marketplace, but we are confident that our core brands will remain robust and the initiatives that we have already out in places will enhance our progress.”