HoF underlying sales continue to fall

House of Fraser has predicted a tough year ahead as it reported a further drop in underlying sales. As a result of weak consumer spending, the department store said like-for-like sales for the 19 weeks ended 10 June dropped 2.4 percent. Last year that decline was 1.3 percent. Total sales, however, rose 8.8 percent thanks to new store openings and added businesses from the recently acquired Jenners and Beatties. Gross margins were also up thanks to less promotional activity. "In March we said that we anticipated that the trading environment would remain difficult for the first half of 2006 and that we expected to experience further cost pressures," said chief executive John Coleman. "This remains our view." Some analysts believe that the buyout offer from Baugur is promising for the company's stock, but others are more reticent. Analysts from Merrill Lynch cautioned that HoF's weak trading and sluggish real estate portfolio made for an unattractive leveraged deal, possibly leading Baugur to try to lower the price, wrote the FT.