Monsoon shares slump after bid talks fail

Clothing retailer Monsoon today delivered a double blow to its investors when it warned on profits and said its chairman was no longer interested in a takeover.

Shares in Monsoon slumped 9% following the collapse of eight months of talks with Peter Simon over the potential purchase of the 24.6% stake that his family did not already own.

Monsoon, which also owns Accessorize, gave no reason for the demise of the discussions but Seymour Pierce analyst Rhys Williams said there was always “a significant gap to bridge in terms of price”.

The retailer was worth around £695m (€1bn) at the start of trading but its value plummeted by around £62.8m (€90.7m) after Mr Simon pulled out of the talks.

Monsoon was one of the leading lights of the retail sector early last year as teenagers and young women continued to spend on fashion despite cutting back elsewhere.

But trading began to deteriorate in the summer and Monsoon conceded in January that it was stuck with a glut of stock ahead of its winter sale after like-for-like sales growth failed to match its expectations.

Monsoon told investors today: “Since that statement trading has continued to be very difficult. Like-for-like sales in the past 10 weeks have been down 4% and new stores have been disappointing.”

This meant that its results for the year to May 27 would be “adversely affected”, although Monsoon insisted that it should at least match the £53.1m (€76.7m) profit that it banked in the previous year.

Seymour Pierce pencilled in £56m (€80.9m) in profits for this year but believed the company would see a recovery in earnings over the following 12 months to £68m (€98.2m) as it benefited from the addition of new space.

Monsoon has expanded rapidly over the past year including the acquisition of 47 new stores from retailer Etam in April, which boosted its trading space by 30%.

It owns more than 388 outlets trading as Monsoon and Accessorize in the UK, while its international operations comprise 299 stores in 35 countries including Ireland, Australia, Brazil, Denmark and France.

Evolution Securities analyst Nick Bubb believed the recent trading woes was likely to be the main reason why the bid talks had not progressed, stating: “Peter Simon has clearly lost his nerve.”