Fashion stores including Oasis, Karen Millen and Principles, take hit from Icelandic collapse

Mosaic, company behind Oasis, Karen Millen and Principles, warns of lower sales and falling profits

The Icelandic-owned company behind fashion chains Oasis, Karen Millen and Principles last night warned of lower sales and falling profits.

Mosaic, which also controls the Warehouse and Coast brands and the Shoe Studio chain, said sales were down 1.2% in the past 23 weeks and profits would be below last year's levels as a result of losing a key foreign exchange hedge owing to the collapse of Kaupthing Bank. The hedge loss will have an even bigger impact next year, warned the retailer.

Its Icelandic connections have also prompted credit insurers to withdraw all cover and suppliers are now providing stock only if Mosaic stores pay cash on delivery.

The retailer, which operates 2,120 stores and employs 13,000 staff, said it was in talks "about the long-term financing of the business". Some 85% of store landlords have agreed to accept monthly rents, rather than quarterly.

Several other Icelandic-backed retailers have also been battered by the collapse of the country's banking system and are searching for buyers. Cruise, Mountain Warehouse and Jones Bootmaker are all understood to be hunting for new investors.

The Mosaic update came as supermarket group Iceland, which is also backed by Icelandic investors, revealed it was taking over 51 former Woolworths stores and would be creating 2,500 jobs. The supermarket has seen its sales rocket as the economy turned downwards, with shoppers trading down to cheaper products.

"We are confident we can help to support the local community in these towns who have lost a major high-street retailer in Woolworths," said Iceland's marketing director, Nick Canning.

Separately, department store chain John Lewis yesterday revealed a huge leap in sales in the week after Christmas, as consumers poured in to snap up clearance bargains. In the seven days to 3 January, sales were up more than 27% on a year earlier. Five stores recorded sales up more than 30%. Sales of electricals were up 39%, fashion was up 34% and even homewares, which have been battered by the moribund housing market, sold well, recording a 13% leap on 2007/8 levels.


Julia Finch

The GuardianTramp

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