Price war takes toll on Jessops

CAMERA retailer Jessops became the latest High Street casualty of the consumer slowdown today when it warned of a sharp dip in profits this year. Shares in the company dived on the news, crashing 42.5p to 112p after it admitted that sales of digital cameras had fallen 'considerably below' management expectations in February and March.

Jessops said its trading troubles were compounded by the impact of rival retailers cutting the prices of cameras and accessories in an attempt to clear stock.

Like-for-like sales, which had grown 6.2% in December, were now expected to be ahead only 1% at the half-year stage. The market slowdown also hit those Jessops stores that opened over the past year and the company said total sales would be around 4.4% higher in the six months to March 31.

In a statement to the stock market, Jessops said it was experiencing a more challenging trading environment and its second half sales growth and margin targets would be lower than predicted. This meant that the full year result would be significantly below previous estimates and also well below last year's figure.

Jessops, which has more than 270 stores, reported underlying annual earnings of £19.5m and sales of £319m in December - its first set of results as a listed company.

The company reassured investors that it was holding its share of the digital market and forecast an improvement in like-for-like sales from April. Shoppers should be tempted back into stores by new products and an increased take-up of single lens reflex (SLR) cameras, which are more versatile than snapshot or point-and-shoot versions, Jessops said.

The plight of retailers since Christmas was highlighted by data from the Office for National Statistics (ONS) this month which pointed to retail sales growth of just 0.2% in February.

The ONS said the volume of retail sales in the three months between December and February fell by 0.6% against the previous quarter - the weakest performance since the Iraq war nearly two years ago. Health and beauty chain Boots has already guided the market towards lower profits and analysts believe the next eight weeks will bring further disappointment from the High Street when the retail results season begins.

Jessops had been seen as relatively immune to the High Street downturn because its products, digital cameras, are a must-have purchase for many consumers. Analysts said that companies that have significant traditional photography businesses were much more vulnerable. However Jessops makes clear today that it is as vulnerable to the ups and downs of trading on the High Street as anyone else.