High street malaise catches up with variety store favourite
Pre-tax profits more than halved at general merchandise giant Wilkinson last year as the retailer was hit by rising retail costs and price deflation.

The 264-store chain has unveiled a 52.5 per cent drop in pre-tax profits to£24.1 million over the year to January 27, according to accounts filed with Companies House.

Despite its turnover rising by 1.71 per cent to£1.13 billion over the period, the business reported a drop in like-for-like transactions. Gross margin is understood to have fallen to its lowest point since the late 1990s.

The low-profile company admitted that driving the bottom line had been a major challenge.

Wilkinson managing director Gordon Brown said: 'Rising operational costs saw profits squeezed during the year, but our overall performance did meet our expectations. We finished the year in a strong position, with an increase in turnover, a growing estate and a rise in the number of customers visiting our stores, which has continued into the current trading year.'

Retail Knowledge Bank senior partner Robert Clark estimated that Wilkinson's like-for-like sales had fallen by up to 2 per cent last year.

Wilkinson's performance dip comes at a time when other general merchandise retailers are also struggling. Earlier this month, rival Woolworths said that trading conditions 'remained difficult' as it unveiled a like-for-like sales decline of 6.7 per cent for the 19 weeks to June 10.

As well as price deflation and rising costs, general retailers have been hit by supermarket giants Tesco and Asda continually encroaching on their territory, by moving into more and more non-food categories.

Clark added: 'Wilkinson has always done well in the past, but I think it did catch the general malaise [on the high street].

'It has opened more stores than in past years, which will have increased costs. I wouldn't say that it shouldn't open any more stores, but having had a good reputation for controlling cost, it obviously has to redouble its efforts.'

Last year Wilkinson opened 19 stores across the country. It plans to open 20 more outlets this year, with the goal of reaching 370 by 2010.

The retailer is in the process of restructuring its board and management team. Brown is to retire after a 14-year stint with the business as soon as a replacement is drafted in. He is only the fourth person to have held the position of managing director since the chain was founded in 1930.

Two non-executive directors will also be appointed to bolster the board.

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