Luxury retailer begins to feel full force of recession

Results at Brown Thomas will not be as strong as in 2007, writes Arthur Beesley, Senior Business Correspondent

FLAGSHIP RETAILER Brown Thomas has started to feel the full force of the recession, warning of lower profits this year and difficult conditions in the coming year as consumers at the top end of the market rein in their spending.

"No one's immune to what's going on in the world at the moment. I think probably things bit here a little earlier than in the UK," says company chief Nigel Blow, an Englishman who was buying and merchandise director at Harrods before he moved to BT last year.

"Across the group the first six months were not at the heady heights of last year, but they were fine. Probably the most noted downturn has been in Dublin, and that's really been August-September. Certainly the last couple of months have got noticeably tougher."

If that doesn't augur well for the imminent Christmas season, Blow still maintains a certain level of confidence. Not that he'd use the word optimistic.

"In the year to date we've done okay, but the next three months are the most key. At times like this it's hard to use the word optimistic. Retailers are always a little bit positive about Christmas, because it's the busiest time of year."

As the economy turned in 2007, Brown Thomas saw a deterioration in business in the third quarter of its fiscal year, which runs to the start of February. However, trading picked up last Christmas. "Probably our toughest part of the year was the third quarter, because of the slowdown. Ironically, Christmas happened for us - albeit it happened late," Blow says.

In spite of pressure on the retail trade at large last year, the company reported a 15 per cent rise in operating profit to €23.09 million from continuing business.

"We did trade well through December I think, and January held up pretty well too. February wasn't so bad and we probably noticed the first effects in March and April," Blow says.

Since then the trend has become well entrenched, with the fall-off in business noticeable in the menswear and formal menswear sections. Although Blow says "women are easier to tempt", the business has warned that its results this year will not be as strong as in 2007.

The downward trend is likely to continue into 2009, Blow concedes. "I think the first half of next year, certainly as we come out of January, will be tough year on year . . . We're certainly mindful that the first half of next year will be tough, and I think that will be tough for everyone."

Although he hints that he may be hopeful of a slight improvement in the second half of 2009, he is cautious. "Logic says next year, by the second half of the year, may be a little better. But are you going to get anyone to predict next year? All we can do is mind our own business really."