Sunday, October 18, 1998 Published at 16:14 GMT 17:14 UK
Business: The Company File
Sock Shop stalks Tie Rack
Airport shopping was one of Tie Rack's most profitable activities
Sock Shop, the hosiery retailer, is looking to merge with Tie Rack, the men's accessory retailer that has gone into the red this year.
Press reports suggest that Tulchan Group, the owners of Sock Shop, will approach Roy Bishko and suggest a deal on Monday.
The merger would create a niche retailer with sales of £100m, and pave the way for the return of Sock Shop to the stock market.
The company is currently owned by a group of venture capital companies who are believed to be seeking an exit from their investment.
Both companies were darlings of the stock market when they were launched. But now Tie Rack shares are down to 23p, valuing the company at only £12.2m.
Asian crisis hit sales
Tie Rack has become vulnerable to merger because of its weak financial position. The niche retailer seems to be the latest victim of the Asian crisis.
For the first half of 1998 the company made a pre-tax loss of £4.2m, compared to a profit of just £158,000 in the previous period.
Chairman Roy Bischko said,
"The deepening financial crisis in Asia and elsewhere in the world, has had a significant effect on consumer confidence."
Turnover was down to £43.7m from £48.9m last time, and the company would not be paying an interim dividend.
The group has 446 stores, up from 419 a year ago. More than half, 283 are overseas. It said that the high pound had hit profits in those stores and among tourists.
Tie Rack has closed 25 under-performing stores and plans to close four more in the next six months.
Mr Bischko said,
"In common with other retailers we continue to experience difficult trading conditions in many of our markets. To mitigate the effects of this, we are taking decisive action including the closure of under-performing stores, the slowdown in our store opening programme, the reduction in stock levels, and the reduction in the dividend."
Sock Shop is much more of a UK chain, with 79 outlets in Britain and only 14 overseas. This had made it less vulnerable to currency fluctuations and a downturn in the tourist trade.
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