


Outlook: Monsoon

PETER SIMON, the Armani-wearing chairman of the Monsoon fashion chain, has a little rule for the boardroom. Directors are not allowed to mention the share price.

If they do mention it, they must pay a pounds 100 fine into a kitty, which is distributed to the company's favourite charity. So far the kitty has nothing in it. If other directors follow the example set by Mr Simon, they never bother to look at the share price anyway.

Which is probably just as well, given its performance. Monsoon came to the market in February at a racy multiple of 19 times the previous year's earnings. Mr Simon sold shares worth pounds 85m on the strength of this rating and they haven't seen that price since. Prior to yesterday's results, the shares had lost almost half their value. No wonder this tragedy is deemed unmentionable in the boardroom.

Is Monsoon simply a victim of the way the retail sector as a whole has been hammered, or is this a question of the company being over-priced at the outset? The pricing of Monsoon float raised eyebrows at the time. It was never clear whether it was Mr Simon pushing for as high an exit price as he could get, or whether his advisers, the then NatWest Securities, genuinely thought the company worth what they were asking. Monsoon rode in on the back of 12 years of unbroken profits growth. But it had also pulled its float before amid concerns over the company's complicated ownership structure.

Since then, sentiment has turned against retailers as consumer spending slows and interest rates edged ever higher. Monsoon has not done anything wrong. It yesterday delivered its 13th year of profit growth and its sales, though 6 per cent down on a same store basis, were not considered poor given the grim summer weather.

The sector has been so unloved that even bargain basement pricing doesn't seem to help. Shares in New Look, which came to the market at the second time of asking in the spring, are also below their issue price despite their discount rating.

The timing of these flotation was plainly poor, given the subsequent downturn in the economic cycle, but perhaps Mr Simon was giving us a sign yesterday that we have reached the bottom. He bought pounds 200,000 worth of Monsoon shares and it's a fair bet he looked up the price before doing so.