Fortnum's shock moves to save store

ONE OF the world's most famous food stores has been plunged into financial crisis following a drop in tourists and corporate clients. Fortnum and Mason, the store that supplies the Queen's Christmas puddings, has told staff their pay will be frozen and it is to open for Sunday trading for the first time since it was founded in 1707, according to a leaked letter.

The full extent of the crisis facing the store - known as the Queen's grocer and famed throughout the world for the quality of its foodstuffs - is revealed in the letter to staff from managing director Stuart Gates. In it he proposes a series of emergency measures to secure its future and avoid 'further redundancies'.

Gates also tells employees: 'The current financial year has presented the company with many difficult challenges resulting from weakened trading. The decline in income from two important revenue streams, namely overseas visitors and corporate business, has resulted in the company having to face certain hard decisions, critical to the future of the store.' One of these was the decision to start opening on Sundays, he said.

Other measures include performance-related staff bonuses and the opening of the ground floor and Patio Restaurant on Sundays from next month. Jana Khayat, Fortnum's 40-year-old chairman, today insisted that Gates's letter was simply 'tidying up the implementation of the plans for Sunday trading'.

Speaking from France, where she is on holiday, Ms Khayat described last year as 'tough'. But she was adamant the decision to open the store on Sundays was not a symptom of a financial crisis. 'It is not as though this is new as we have been implementing Sunday trading since October,' she said. 'It came as no surprise to anybody.'

The leaked letter is the latest in a series of blows for the struggling store. In November 2001 Fortnum was taken into private ownership by the Weston family after 62 years as a public company. Stock market watchdogs had warned that it could lose its listing after its share price slumped from a high of £9 in 1997 to less than £4.

The company, which has been criticised for its old-fashioned style and refusal to focus on the famous food business, has attempted to modernise by launching an online shopping service and selling hampers and other Fortnum products overseas via mail order.

However, the store continues to rely heavily on foreign visitors and its sales in recent years have been hit whenever there has been a slump in tourism - such as that caused by the foot-and-mouth crisis.

The Queen's grocer

William Fortnum, a royal footman who sold used candles to boost his income, met Hugh Mason, a grocer, in 1705. Fortnum & Mason opened its doors in 1707.

In the mid-19th century, the store sold ready-roasted duck and green peas at 5s and a whole truffled pheasant for 15s.

Its cellar is full of priceless wine - including bottles kept in storage for customers who have long since vanished. Among them is a £20,000 case of Chateau Latour 1949, containing six bottles of what is described as the 'perfect vintage'.