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City dampens Monsoon's faith in Fusion

Struggling high street chain Monsoon is pinning its hopes on trend-led collection Fusion to help lift falling sales, after posting a profit warning this week.

A spokesman for the retailer said chairman Peter Simon was disappointed with the chain's recent performance, after it warned that profits would fall below expectations for the year to May 26, at between £46 million and £50m.

The spokesman said Fusion was a good example of a better-performing part of the retailer's portfolio and would play a key role in how it planned to "mitigate the effects of the difficult trading environment".

"It is cheaper, targets a different audience and offers a more tailored look," he said, adding that there were plans to expand the collection.

Fusion launched in 48 Monsoon stores last September in a bid to retain the younger shoppers attracted during the boho-chic trend of spring 05. The range doubled its distribution to an extra 50 shops earlier this month.

But City analysts said they were unconvinced that Fusion would help to rescue Monsoon. Investec analyst Mark Charnock said: "Monsoon was fortunate to be so on-trend for a year or two around 2005, but now we're seeing the unwinding of that. Leopards can't change their spots - not that quickly anyway."

Teather & Greenwood analyst Rhys Williams dismissed Monsoon's optimism. "How can Monsoon be confident about spring lines when they are already in stores and February's figures are down?" he said. "New collections are introduced in February, so trading should be on the up."

Monsoon said it had incurred additional costs and suffered disruption to supply following its move to a new distribution centre.

GRIM READING FOR MONSOON

Figures for six months to November 25 2006

- Like-for-like sales decreased by 6%, against a rise of 4% last year

- Pre-tax profit down 5% to £24.2m, compared with £25.5m last year

- Like-for-like sales in the eight weeks to 20 January down 8%, against a rise of 5% last year

- Pre-tax profits for the year to May 26 are set to be below current analysts' forecasts and in the range of £46 million to £50m.

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