Department store operator Beale reported a loss before tax of £1.2m in the half-year to end-April (2010: profit £0.9m). No dividend is proposed.
The loss included £1.3m of exceptional costs in connection with the acquisition of 19 stores.
Gross sales, which include concession sales and VAT, were up 3.3%. Revenue at £27.3m (2010: £26.2m) increased by 4.0%.
Mike Killingley, Chairman, commented: 'Your Board regards the acquisition of the 19 ARCS stores as essential to the Group's strategy to achieve greater critical mass, to enable Beales to prosper in the modern retail environment and accelerate the restoration of profitability."
'The acquisition has increased our trading floor space by 80% from about 550,000 to 1 million square feet, and the number of stores we operate has increased from 13 to 32.
'There is considerable scope to improve the performance of the new stores to the levels currently achieved by Beales. We shall also be able to improve purchasing arrangements, and achieve economies of scale.'
Even after adjusting for the exceptional costs, the results were disappointing. Gross sales, which include the full value of concession sales and VAT, were up 3.3%. Revenue, which comprises own bought sales and the commission received on concession sales, increased by 4%.
Retail sales were seriously affected over the Christmas period by snow, as stated in the annual report published in January 2011. In addition, during the spring we made the decision to focus on margins rather than volume, and in April did not repeat the aggressive '25% off' mega days of April 2010. In consequence April saw a 3% improvement in own bought margins, and we are continuing with this trading strategy. Like for like gross margins for the half year were thus slightly better than last year, at 54% (2010: 53.8%).
These results include the sales of the Hexham and Rochdale stores acquired in the second half of last year. Excluding these two stores, like for like Group revenue declined by 9.2% in the first half year.
At the period end net debt had increased to £7.87m (1st May 2010: £6.66m). The increase since the same time last year is mainly attributable to the losses in the first half-year and to the costs, incurred in the second half of our last financial year, of acquiring and refurbishing the stores acquired last summer in Hexham and Rochdale.
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