Fenwick profits drop as salary rises take their toll

Family-run department store group Fenwick posted operating profits down 9.2 per cent last year, as rising costs and staff salary increases hit its bottom line.

The retailer's operating profits fell to£29.6 million for the 52 weeks to January 27, down from£32.6 million in the 2005 period, according to figures filed at Companies House. Net sales were almost flat, down to£329.1 million, compared with£329.9 million last year.

The results come as the department store sector is on tenterhooks, with Icelandic investor Baugur on the verge of making a formal bid for House of Fraser as Retail Week went to press.

Despite salary costs jumping 4.6 per cent to£43.8 million, Fenwick remains one of the most profitable UK department store groups, recording an operating margin of 10.8 per cent on net turnover for the period.

Retail Knowledge Bank senior analyst Robert Clark said: 'A significant jump in its salary bill caused Fenwick's fall in operating profits. What is unusual is that staff received a bigger increase in pay than directors.

'It marginally underperformed last year, as its sales were static and Debenhams' and John Lewis's sales increased. But Fenwick is clearly a tightly-run ship and therefore is one of the most profitable in its sector.'

Fenwick refused to comment on its figures.