Troubled Times for Benson Group

When Benson announces its annual results on Wednesday, it is expected that the group's profits will be around $6m. This will mean a drop of some 25% compared with the previous year. Today, Benson's share price fell to just under $7 in anticipation of the results. Two or three years ago, it will be recalled, the share price stood at $10.

One of Benson's biggest problems is that it lacks a clear image. Although some well-off customers have stuck to Benson through thick and thin, many others have moved on and now shop at Hi-Mark. These customers seem to prefer Hi-Mark's tasteful decor and high-priced, exclusive goods. Another of Benson's disadvantages is that its merchandise does not particularly appeal to younger buyers. These prefer the self-service, down-market approach of Levinson Brothers - Benson's other main rival. Both Hi-Mark and Levinson Brothers are profitable organisations. Hi-Mark's strategy is, essentially, to maintain good profit margins on all its merchandise. Levinson Brothers, on the other hand, aim for high volume and lower margins.

All three organisations - Benson, Hi-Mark and Levinson Brothers - face a common problem. They are all aware of the threat coming from the new multiple stores - retailers like Klassic, Marginal and Clique. These are 'muscling in' on the other groups' traditional markets of clothing, home decoration and food. The new multiples have been very successful at attracting to their stores fashion-conscious customers, both young and old. They seem to have the knack of offering exciting, stylish goods at prices people can afford.

Rising costs have been the main cause of Benson's low profits. Stock levels tend to be high, but very often goods are not available when required by customers. At present, goods are kept in warehouses at each store. Benson are considering changing this system. It may build one or two huge distribution centres which will supply all the stores. This could be a less costly way of organising its warehousing facilities. In addition, it has been suggested recently that service at Benson's stores is not what it used to be. It is believed, also, that staff turnover and absenteeism is too high.

Unless Benson's management take action soon to revive the group's fortunes, it would seem that the outlook for the organisation is bleak.