DEPARTMENT store group Beales is bracing itself for a "challenging" year after tough Christmas trading dented its recent recovery.

The 12-store chain, which has a branch in Winchester, said it had shared the festive pain of other retailers after gross sales fell 3.6 per cent in the 11 weeks to January 15, offsetting some of the progress reported in a trading update in November.

Bournemouth-based Beales said it remained confident in its recovery plan, but warned against "dramatic improvements in the present climate".

The group has taken a series of measures to improve its fortunes, including the launch of younger fashion ranges such as Oasis (pictured) and Miss Sixty. However, as previously reported in the Daily Echo, the new ranges were reckoned to be too trendy for the Winchester store, which was alone in not being assigned a shipment. Such young fashion brands were deemed surplus to requirements in the ancient city's 20,000 sq ft Brooks Centre store, where 40 people are employed. It is sticking to a traditional range for older customers.

Overall, the initiatives kept the fall in gross sales to 2.7 per cent in the final six months of the financial year to October 30, although that proved insufficient to prevent turnover for the year falling by 5.5 per cent to £65.3m.

Bottom-line profits fell to £264,000 from £1.1m a year earlier and reflected the impact of intense competition, price deflation and fragile consumer spending, the company said in its annual results statement.

Among other recent changes, Beales said it had improved merchandising techniques and customer service, as well as boosting margins through

better stock management and the identification of cost savings.

Chairman Mike Killingley said he believed the moves would be "particularly beneficial" when the trading environment improved.

However, he warned against dramatic improvements in the near term: "The difficulties experienced during the Christmas trading period, coupled with expectations that 2005 will be a tough year for retailers in general, reinforce the view that it will be another very challenging year for the group."