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Start-rite parent reports 30% decline as margins are squeezed

James Southall, the parent company of kids’ footwear brand Start-rite, has posted a 30% decline in pre-tax profits as a result of “one-off and exceptional items”.

Over the calendar year for 2011 James Southall recorded pre-tax profits of £1.25m, down from £1.78m in 2010.

Turnover increased by 21.8% to £21.5m, up from £17.6m. However this was offset by what group chairman Peter Lamble described as a “squeeze” on gross margins.

In his chairman’s statement Lamble said direct comparisons between 2010 and 2011 were “difficult” as there were one-off and exceptional items affecting both years.

However, he highlighted the rising cost of shoes as the main factor dampening profits last year.

“The average price we paid for a pair of leather shoes (admittedly affected somewhat by product mix), rose by just over 10% over the year. By contrast, our selling prices were up by 5%, being the most we judged the market would stand,” he explained.

The company’s wholesale business declined by 3% because of a number of store closures, which included some of Start-rite’s key customers.

James Southall also acquired kids’ footwear mini-chain One Small Step One Giant Leap in April 2011. The deal gave Start-rite, which has approximately 450 UK wholesale accounts, a UK retail presence for the first time.

But the retailer, which has eight stores and six concessions, made a trading loss in 2011. The business traded better as the year went on and has continued to trade well into 2012, the report said.

Looking ahead Lamble said that pressures and threats, including an increase in purchase prices and a squeeze on consumer spending, continued to be a concern.

But he singled out the appointment of Eve Davies, who joined the business as brand director at the end of last year, as central to get back on track, increasing the attractiveness of its shoes and promoting a stronger marketing message going forward.

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