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Alexon warns on profits despite sales growth

Alexon, the womenswear group which includes chains such as Eastex, Ann Harvey and Kaliko, saw group like-for-like sales rise by 13.3% over the festive and Sales period but has issued a second profit warning after gross margin gains were eroded.

For the five weeks to January 22 like-for-like sales were up 13.3%, with early spring ranges performing positively. Cumulative like-for-like sales were down 1.1% for the 25 weeks to January 22, a big improvement on the 20 weeks to December 18, which saw a 4.7% dip.

However gross margin gain was 2.1% over the period, down on the positive 2.8% gain figure the group gave on November 25. Margin gains were impacted after sales were hit by the pre-Christmas snow leaving the company with more stock to clear.

The Alexon Group said it expected to deliver profit before tax for the year ending January 29 of between £0.7m and £1m - below market expectations.

House broker Investec said: “Despite a like-for-like recovery over recent weeks against last year’s weak weather-affected comparatives, clearance activity has resulted in further erosion to gross margin gains.”

Investec reduced its full year 2011 profit before tax forecast from £1.3m to £0.85m.

Seymour Pearce analyst Freddie George said: “Although the statement reads positively this is effectively another profit warning.”

Following the update, Seymour Pierce also reduced its pre-tax profit forecast from £1.5m to £0.8m. It has also reduced its 2011/12 pre-tax profit forecast from £3m to £2m.

Alexon posted its first profit warning before Christmas.

However Alexon said it had been encouraged by initial reaction to its spring 11 collections and that spring 11 margin was trading ahead of last year. It added that strong online sales were also ecouraging.

The company added that excess autumn 10 stock has now been cleared

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