The economic slowdown and flood damage to its flagship Grafton Street store hit sales at up-market retailer Brown Thomas last year. John McManus reports.

The group recorded a 3 per cent fall in turnover to €188.3 million in the 12 months to the end of February.

Profits before tax showed an increase of 6 per cent to €19.4 million, reflecting a €1.7 million gain on the disposal of a Dublin property.

The group also incurred a €2 million rationalisation charge in the year. Around 40 jobs were shed in administration and other support functions. The group employs around 1,600 people, mostly on a part-time basis.

"It was a difficult year for us," said Mr Paul Kelly, the Brown Thomas Group chief executive. "A number of things happened; 2002 had been a fantastic year, but just after Christmas things started to dip and then we went from that into the flood," he said.

Repairing the damage to the Grafton Street store took almost 10 months and affected trading he said.

It delayed a €20 million redevelopment of the store, which included doubling the space given to women's fashion and a consolidation and re-focusing of the homeware department.

This redevelopment was now 70 per cent complete and there had been a significant improvement in trading since the year-end, he said, helped by the improving economic background.

Based on current trends, sales are expected to be ahead 15 per cent this year, with a proportional increase in pre-tax profits, according to Mr Kelly.

The Dublin store accounts for around half of group business, according to Mr Kelly. Brown Thomas Group also includes the three sister stores outside Dublin, the A-wear chain and BT2.

The 2004 accounts detail the role played by Brown Thomas Group in the takeover of Selfridges & Co last year by Canadian businessman Mr Galen Weston.

As part of the deal, Brown Thomas - which is 100 per cent owned by the Weston family - acquired a 22 per cent stake in Selfridges Holdings Limited for €72.4 million. The purchase was funded through borrowings, with long-term debt rising from €185,000 to €66.5 million.

Mr Weston paid €1.25 billion for Selfridges and, according to a note in the accounts, the Selfridges shares are, in the opinion of the directors, worth "at least the amount at which they are stated in the balance sheet".

Mr Kelly, who is also chief executive of Selfridges since February, has an interest-free loan of €635,000 from the group, according to the accounts. The accounts also show that the directors of the group received remuneration of €468,000. Mr Kelly is the only executive director of the company and the bulk of the remuneration related to his salary and pension payments.

Group pension schemes have a deficit of €5.6 million and the accounts note "the impact of the deficit arising on the group schemes on the future pension costs of the company will be to increase the contribution rate to the scheme".