Womenswear group Alexon, which includes the Ann Harvey and Kaliko chains, reported group like-for-like sales up by 13.3% in the five weeks to January 22 but issued a second profit warning after gross margins were eroded.
The retailer said early spring ranges performed “positively” in the period. 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, when sales were 4.7% down.
Hiowever, Alexon expects pre-tax profit for the year ending this Saturday January 29 of between £0.7m and £1m - lower than analysts had hoped.
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 cut its full year profit forecast from £1.3m to £0.85m.
Seymour Pierce analyst Freddie George said: “Although the statement reads positively this is effectively another profit warning.” He reduced his forecast from £1.5m to £0.8m.
Alexon originally warned on profits last month, after arctic weather conditions affected peak trading. The December problems left Alexon with excess autumn stock, which has now been cleared.
The autumn 2010 margin gain now stands at 2.1% against the previous year, compared with 2.8% reported in November. Total margins for the second half remain flat. The margins for spring 2011 are currently trading ahead of last year.
Alexon said it was encouraged by the initial reactions to its spring 2011 range and a” strong” e-commerce performance. “Whilst the 2011 economic outlook will remain challenging, we are confident that we are well placed in our recovery to continue to make good progress in the year ahead,” the retailer maintained.
The retailer also reported that a conventant breach highlighted in December has been resolved. Net debt at the year end is expected to be £9.2m.