Discount retailer Brown & Jackson today unveiled plans to raise £25.4m to fund an overhaul of its Poundstretcher stores.
The Leeds-based group said it was issuing more than 50m new shares and accelerating the conversion of its 281-strong chain of Poundstretcher stores into its new Instore format.
Money from the rights issue will also go towards a new distribution centre at Huddersfield and replacement of the group’s IT system.
News of the rights issue came as Brown & Jackson reported flat like-for-like sales and operating losses of £400,000 for the 53 weeks to 28 February – in line with market expectations.
But analysts worried about current trading after like-for-like sales grew 2% in the 15 weeks to 17 April, compared with around 5% at the time of its previous trading update in January.
Margins over Easter were also lower than expected as a result of aggressive stock clearance and changes in the range of products on offer.
Christo Wiese, chairman of Brown & Jackson, hailed the trading performance of its Instore brand as giving the group “clear strategic direction”.
Instore offers modern fittings and a greater focus on homeware than Poundstretcher, with the name change designed to distinguish it from “everything for a pound” stores.
Like-for-like sales at Instore have improved by 20% since its launch in September at seven stores including Macclesfield, Durham and Milton Keynes.
Brown & Jackson, which hopes to convert 50 Poundstretcher stores this year, was forced to rush out a profits warning in January following a steep fall in sales over Christmas.
The poor performance was blamed on the wrong product mix, low-key promotional activity, a lack of capacity at distribution centres and weak trading at its 170 high street stores.
The company said: “We are confident that our in-depth review of Christmas trading has identified the relevant issues and that we are implementing the necessary changes.”
Its high street outlets had shown a “marked recovery” in the past few months, slowing a 12.7% fall in like-for-like sales over Christmas to just 1.3% in 2004.
Shares were down 12% today as investors digested the impact of the rights issue on their investment.
References: EGi News 22/04/04
