Luxury jeweller Theo Fennell is being tipped to return to profitability thanks to a programme of investment in its stores and website and the introduction of an entry-level range.

The AIM-listed retailer, which has been pushing to get back into the black after posting a reduced loss of £250,000 last year, said sales for the first six months of its year, starting April 1, were up 11%.

The retailer said it benefited from refurbishing two London stores, one in the City and the other its flagship in Chelsea.

It is introducing a more value-led offer this month, which features items starting at £70 - well below its usual starting point of about £500. The retailer will also relaunch its transactional website in November.

Seymour Pierce analyst Freddie George is forecasting that Theo Fennell will return to growth with a pre-tax profit of between £500,000 and £750,000 when it posts its full-year results. George said the retailer would benefit from a positive longer-term outlook for luxury goods, as well as the changes outlined by the retailer last week, particularly the new entry-level range, which he said would “broaden the company’s customer base”.

However, Theo Fennell chairman Rupert Hambro remained cautious. He said: “Although we are encouraged by the continued growth in sales, we remain cautious as we enter the key Christmas period given the ongoing challenging economic environment.”