Investment: Playtime over at Hamleys

KIDS WILL not be the only people longing for a present from Hamleys this Christmas. Shareholders in the toy retailer will also be pleading with Santa for a good Yuletide sales performance to salvage something from what has been a pretty rotten year.

Two profits warning, a collapse in the share price and, yesterday, a 50 per cent slide in interim profits are far from child's play.

To be sure, the high street has been tough as consumer confidence wanes, and Hamley's world-famous Regent Street store has suffered from a fall in tourist spending.

But Hamleys cannot simply blame external factors for its travails. Sales in the Toystack chain, acquired last year for pounds 9m, plunged by more than 10 per cent due to an amazing information technology blunder. The management swears that the problem has been sorted out, but sales are still sharply down on last year with little prospect of a strong upturn before the end of the period.

House of Toys, the shops sited inside Debenhams stores which were acquired in 1997, were also in the red as sales slumped. The Regent Street outlet and its airport off-shoots saw an increase in margins, but like-for-like sales were still down on the year.

Christmas could yet provide a fillip, but with the economy heading down and rivals poised for a price war, it will not solve all the problems. The company itself admits that no matter how bumper it turns out to be, the festive season would not help to make up for the pounds 1m of earnings lost in the first half.

Hamleys shares fell 12 per cent to 118.5p yesterday - an all-time low. They are now on a mere six times 1998 earnings of around pounds 6.5m - a tempting multiple but, given the economic state of play, they should be avoided.