Theo Fennell

As foreshadowed by October's profit warning, interim financials from international luxury jeweller Theo Fennell lacked sparkle, reflecting the impact of the recession on consumer confidence.

For the half to September, Theo Fennell suffered a 20% fall in sales to £10.2m as credit crunch-sapped consumers kept their cash in their pockets, while pre-tax profits of £434,000 made way for losses of £840,000, in part reflecting Theo Fennell’s recent investment in expansion into overseas markets including Dublin and the Middle East.

Reiterating his recent comments, chairman Richard Northcott said sales had been ‘significantly impacted’ by the current recession and recent trading had proved difficult, in line with retail peers. Moreover, given downturn in consumer spending and with a very tough 2009 shaping up, the group is cutting costs and its ‘further expansion plans are being reviewed’. Significantly, Theo Fennell is in talks with a potential outside investor, which might take a meaningful stake in the business and help finance its expansion plans, although the credit crunch means talks have been drawn out.

Theo Fennell’s recent setback illustrates the sheer severity of this current all-embracing economic downturn, since up until this point the company has experienced unfettered year-on-year growth.

While Theo Fennell still expects to make a small profit for the year and boasts a luxury brand (favoured by many celebrities) that underpins its long-term prospects, its shares, which have lost much of their shine, are best avoided short term given the current inhospitable retail climate.