Interim Results

Retail Stores PLC
18 March 2004

FOR IMMEDIATE RELEASE
18th March 2004

                               RETAIL STORES PLC:

            INTERIM RESULTS FOR SIX MONTHS ENDED 31ST DECEMBER 2003

                                   HIGHLIGHTS


   • Despite a process of repositioning, turnover was £21.2m compared with
     £22.8m last year
   • Gross margins were maintained and the underlying overhead cost base
     continued to fall
   • Operating loss of £0.8 compared with £0.3m last year
   • New management team in place and core restructuring completed
   • Revitalised contemporary Ladies Fashion and a more focused Menswear offer
     introduced
   • New initiatives introduced in Fine Jewellery, Gift Room and Chocolate
     Shop
   • Strengthened Christmas offer, improved quality and breadth of Arts and
     Crafts furniture and successfully introduced new Liberty branded
     Childrenswear range


'Our firm intention is to increase the Liberty branded mix within the flagship
store to both drive gross margin and provide a sound base for wider
distribution.'


'The building blocks for a return to profitability are in place and the true
value of the skills of the new team will start to impact both sales and
operating profits as we move through 2004.' Richard Balfour-Lynn, Chairman


                                     -more-

Contact:

          Iain Renwick, Chief Executive, Retail Stores.    Tel:[phone]
          Nick Mather, Finance Director, Retail Stores.    Tel: [phone]
          Baron Phillips, Baron Phillips Associates        Tel: [phone]


CHAIRMAN'S STATEMENT
for the six months ended 31st December 2003

Satisfactory progress has been made in the commercial turnaround of the business
over the six months ended 31st December 2003. This was a period of
transformation for the Group driven by the new management team installed at the
beginning of the period. Significant changes in both product mix and the store
environment have repositioned Liberty as a more contemporary experience with
real relevance to today's consumer.


Footfall has continued to grow. However a complete review of the product offer
and floor plans across all of the Home and Fashion areas necessitated a
short-term reduction in stock levels to allow a more authoritative and
directional product range to come in. Despite this repositioning process,
turnover was £21.2m for the period against £22.8m last year. Gross margins were
in line with last year and the underlying overhead cost base continued to fall.
The resultant operating loss was £0.8m compared to £0.3m last year. I am pleased
to say that a concerted stock build of new product is now underway and will be
present in strength and depth as we move through the Summer season.


Our new management team is now in place and the core restructuring completed.
Our focus remains on returning the business to profitability whilst building a
range of compelling Liberty branded products. During the Autumn/Winter season we
introduced new initiatives in Fine Jewellery, in the Gift Room and in our ground
floor Chocolate Shop. We strengthened our Christmas offer, improved the quality
and breadth of our Arts and Crafts furniture and successfully introduced a new
Liberty branded Childrenswear range. The changes in the instore environment have
successfully heightened our profile, attracting more fashion and design aware
customers back to Liberty.


This season has seen the introduction of a revitalised Contemporary Ladies
Fashion offer on the first floor and a more commercially focused and vibrant
Menswear range on the lower ground floor. We have reopened the ground floor
Central Atrium as a luxury Contemporary Accessories area with an original
selection of must-have accessories. In Home, we are focused on building an
authoritative and credible offer through 2004 encompassing a dedicated furniture
floor on the 4th floor of Tudor House, complemented by extensive new offers in
real depth across the Bed and Bath, Tabletop and Kitchen areas. A new Outdoor
Living concept successfully opened this month presenting customers with an
inspirational collection of outdoor furniture and accessories.


Our firm intention is to increase the Liberty branded mix within the flagship
store to both drive gross margin and provide a sound base for wider
distribution. This mix has increased in Gift, Ladies Fashion and Accessories for
Spring/Summer and we will see significant increases in Bed and Bath and Toiletry
products for Autumn/Winter.


We are concentrating hard on improving processes and customer service and are
currently driving an extensive programme to extend our brand proposition
throughout the business.


The building blocks for a return to profitability are in place and the true
value of the skills of the new team will start to impact both sales and
operating profits as we move through 2004.

Richard Balfour-Lynn
Executive Chairman
London
18th march 2004


CONSOLIDATED PROFIT AND LOSS ACCOUNT

for the six months ended 31st December 2003

                                          6 months         6 months      12 months
                                             ended            ended          ended
                                     31st December    31st December      30th June
                                              2003             2002           2003
                                                          (restated)*     (restated)*
                              Notes          £'000            £'000          £'000
Turnover                        2           21,152           22,795         40,070
Cost of sales                              (11,626)         (12,495)       (22,264)
------------------------------------------------------------------------------------
Gross profit                                 9,526           10,300         17,806

Selling and distribution                   (10,663)         (11,175)       (20,956)
costs
Administrative expenses                     (1,425)          (1,307)        (2,671)
Other operating income                       1,808            1,902          3,608
------------------------------------------------------------------------------------
Operating loss                                (754)            (280)        (2,213)
Operating loss before
exceptional charges                           (754)            (280)        (1,519)
Exceptional operating           3                -                -           (694)
charges
------------------------------------------------------------------------------------
Operating loss                                (754)            (280)        (2,213)
------------------------------------------------------------------------------------
Loss on ordinary
activities before interest
and taxation                    2             (754)            (280)        (2,213)

Net interest payable and
similar charges                             (1,215)          (1,234)        (2,435)
------------------------------------------------------------------------------------
Loss on ordinary
activities before
taxation                                    (1,969)          (1,514)        (4,648)
Taxation on loss on
ordinary activities                           (332)            (146)          (467)
------------------------------------------------------------------------------------
Loss on ordinary
activities after
taxation                                    (2,301)          (1,660)        (5,115)
Equity minority
interests                                     (173)            (142)          (310)
Non-equity minority
interests                                      (27)             (27)           (55)
------------------------------------------------------------------------------------

Loss attributable to 
ordinary shareholders                       (2,501)          (1,829)        (5,480)
Undeclared non-equity
preference dividends            4              (11)             (12)           (23)
------------------------------------------------------------------------------------
Retained loss for the
period                          7           (2,512)          (1,841)        (5,503)
====================================================================================

Basic and diluted loss per
share                           5            (11.1p)           (8.1p)        (24.3p)

Basic and diluted loss per
share before exceptional
operating charges               5            (11.1p)           (8.1p)        (21.3p)
====================================================================================


All operations are continuing.


* The comparative periods profit and loss accounts have been restated as
  explained in note 1.



CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

for the six months ended 31st December 2003


                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                                        (restated)
                                           £'000            £'000        £'000
--------------------------------------------------------------------------------
Loss for the period                       (2,501)          (1,829)      (5,480)
Unrealised surplus on revaluation
of property                                    -                -        1,651
Currency translation differences
on foreign currency net                                         
investments                                   71             (101)        (141)
--------------------------------------------------------------------------------
Total recognised gains and losses
for the period                            (2,430)          (1,930)      (3,970)
--------------------------------------------------------------------------------

All recognised gains and losses are attributable to equity shareholders'
interests.


NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES

for the six months ended 31st December 2003

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                                        (restated)
                                           £'000            £'000        £'000
--------------------------------------------------------------------------------
Reported loss on ordinary 
activities before taxation                (1,969)          (1,514)      (4,648)

Difference between historical
cost of depreciation charge and
depreciation charge based on
revalued amounts                               7                3            1
--------------------------------------------------------------------------------
Historical cost loss on ordinary
activities before taxation                (1,962)          (1,511)      (4,647)
================================================================================
Historical cost loss after
taxation, minority interests and
dividends                                 (2,505)          (1,838)      (5,502)


RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS

for the six months ended 31st December 2003


                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                                        (restated)
                                           £'000            £'000        £'000
--------------------------------------------------------------------------------

Opening shareholders' funds               48,699           52,669       52,669
Loss for the financial period             (2,501)          (1,829)      (5,480)
Undeclared non-equity preference
dividends proposed for the period            (11)             (12)         (23)

Net revaluation surplus on fixed
assets                                         -                -        1,651
Currency translation differences
on foreign currency net
investments                                   71             (101)        (141)
                                                             
Unpaid non-equity preference
dividends                                     11               12           23
--------------------------------------------------------------------------------
Closing shareholders' funds               46,269           50,739       48,699
================================================================================

Included in closing shareholders' funds is an amount attributable to non-equity
shareholders.


CONSOLIDATED BALANCE SHEET

at 31st December 2003

                                        31st December    31st December    30th June
                                                 2003             2002         2003
                                                             (restated)*
                                Notes           £'000            £'000        £'000
------------------------------------------------------------------------------------
Fixed assets
Intangible asset                               18,200           18,200       18,200
Tangible assets                    6           78,304           78,221       79,029
------------------------------------------------------------------------------------
                                               96,504           96,421       97,229
------------------------------------------------------------------------------------
Current assets
Stocks                                          5,820            6,739        5,537
Debtors:
amounts falling due within
one year                                        6,473            7,121        6,132
amounts falling due after more                                   
than one year                                   1,007            1,236        1,138
Cash                                            4,901            6,715        4,513
------------------------------------------------------------------------------------
                                               18,201           21,811       17,320
Creditors: amounts falling due
within one year                               (15,180)         (14,094)     (12,423)
------------------------------------------------------------------------------------
Net current assets                              3,021            7,717        4,897
------------------------------------------------------------------------------------
Total assets less current
liabilities                                    99,525          104,138      102,126
Creditors: amounts falling due
after more than one year                      (50,933)         (51,086)     (51,109)
Provisions for liabilities and
charges                                             -             (120)           -
------------------------------------------------------------------------------------
Net assets                                     48,592           52,932       51,017
====================================================================================

Capital and reserves
Called up share capital                         6,036            6,036        6,036
Merger reserve                     7           61,503           61,503       61,503
Revaluation reserve                7            8,880            7,234        8,887
Profit and loss account            7          (30,150)         (24,034)     (27,727)
------------------------------------------------------------------------------------
Total shareholders' funds                      46,269           50,739       48,699
Analysed as:
Equity shareholders' funds                     45,804           50,296       48,245
Non-equity shareholders'
funds                                             465              443          454
------------------------------------------------------------------------------------
Equity minority interests                       1,745            1,615        1,740
Non-equity minority
interests                                         578              578          578
------------------------------------------------------------------------------------
                                               48,592           52,932       51,017
====================================================================================

The balance sheet at 31st December 2002 has been restated as explained in note 1.

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 31st December 2003

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                            31st             31st         30th
                                        December         December         June
                                            2003             2002         2003
                                                        (restated)*
                                Notes      £'000            £'000        £'000
--------------------------------------------------------------------------------

Net cash inflow from operating
activities                         8       2,856            4,751        4,606
Returns on investments and
servicing of finance               9      (1,359)          (2,022)      (3,471)
Taxation paid                               (526)            (449)        (375)
Capital expenditure                         (683)          (1,930)      (2,329)
--------------------------------------------------------------------------------

Net cash inflow/(outflow)
before financing and use of
liquid resources                             288              350       (1,569)

Management of liquid
resources                                 (2,200)               -           -
Financing                         10           -            3,000       3,000
--------------------------------------------------------------------------------

(Decrease)/increase in cash       11      (1,912)           3,350        1,431
during the period
================================================================================

* The previous six month period cash flow statement has been restated as
  explained in note 1.


RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

for the six months ended 31st December 2003

                                         6 months         6 months    12 months
                                            ended            ended        ended
                                    31st December    31st December    30th June
                                             2003             2002         2003
                                                        (restated)
                            Notes           £'000            £'000        £'000
--------------------------------------------------------------------------------

(Decrease)/increase in
cash during the period        11           (1,912)           3,350        1,431

Increase in liquid
resources                     11            2,200                -            -
Increase in loans during
the period                                      -           (3,000)      (3,000)
--------------------------------------------------------------------------------

Increase/(decrease) in net
debt during the period                        288              350       (1,569)
Translation differences       11              100              119         (164)
--------------------------------------------------------------------------------

Movement in net debt
during the period                             388              469       (1,733)
Opening net debt              11          (43,487)         (41,754)     (41,754)
--------------------------------------------------------------------------------

Closing net debt              11          (43,099)         (41,285)     (43,487)
================================================================================

NOTES TO THE ACCOUNTS

1.  ACCOUNTING POLICIES

The interim results of the Group for the six months ended 31st December 2003
incorporate the results of the Company and its subsidiary undertakings for the
six months then ended. The results have been prepared on the basis of the
accounting policies adopted in the accounts of the Group for the period ended
30th June 2003, consistently applied in all material respects, except as noted
below.


The interim accounts of the Group include the interim accounts of the Company
and its subsidiary undertakings made up to the six months ended 31st December
2003. The interim accounts for the comparative period were previously reported
for the 26 weeks ended 28th December 2002 and have now been restated to the
period ended 31st December 2002. This restatement had no material effect on the
loss on ordinary activities before taxation disclosed in the interim accounts of
the Group.


Amendment to FRS5 (Application note G: Revenue Recognition) published in
November 2003 requires sales by concession departments to be accounted for on a
commission only basis. Due to the significance of concession sales to the
business, the Group's accounting policy with regard to recognition of sales has
been amended so that turnover includes only the commission earned on such sales.
Previously turnover included total sales by concession departments and cost of
sales included turnover net of the commission on these sales. The effect on
turnover and cost of sales is explained in note 2. This amendment had no effect
on the loss on ordinary activities before taxation disclosed in the Group
accounts. Comparative amounts for turnover and cost of sales as disclosed in the
profit and loss account have been restated accordingly.


2.  DIVISIONAL ANALYSIS

                                       6 months         6 months     12 months
                                          ended            ended         ended
Turnover                          31st December    31st December     30th June
                                           2003             2002          2003
                                                       (restated)    (restated)
                                          £'000            £'000         £'000
By class of business:
Retail                                   15,270           17,013        28,753
Wholesale                                 5,882            5,782        11,317
--------------------------------------------------------------------------------
                                         21,152           22,795        40,070
================================================================================

By geographical origin:
United Kingdom                           18,753           20,610        34,516
Japan                                     2,399            2,185         5,554
--------------------------------------------------------------------------------
                                         21,152           22,795        40,070
================================================================================

By geographical destination:
United Kingdom                           16,082           18,230        30,380
Japan                                     2,401            2,302         5,738
Other                                     2,669            2,263         3,952
--------------------------------------------------------------------------------
                                         21,152           22,795        40,070
================================================================================


Historically sales from concessions have been shown on a gross basis in
accordance with industry practice. Following the amendment to FRS5 (see note 1)
sales from concession departments are now shown on a commission only basis as
follows:-

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                           £'000            £'000        £'000

Gross Turnover                            24,409           26,520       46,550

Less concession departments
turnover net of commission                (3,257)          (3,725)      (6,480)
--------------------------------------------------------------------------------
Net Turnover                              21,152           22,795       40,070
================================================================================


                                        6 months         6 months    12 months
                                           ended            ended        ended
Loss on ordinary activities        31st December    31st December    30th June
before interest and taxation                2003             2002         2003
                                                        (restated)
                                           £'000            £'000        £'000
By class of business:
Retail                                    (1,713)          (1,011)      (3,985)
Wholesale                                    959              731        1,772
--------------------------------------------------------------------------------
                                            (754)            (280)      (2,213)
================================================================================

By geographical origin:
United Kingdom                            (1,308)            (650)      (3,318)
Japan                                        554              370        1,105
--------------------------------------------------------------------------------
                                            (754)            (280)      (2,213)
================================================================================


The segmental analysis of operations reflects the structure of the Group. Retail
includes the UK retail operations at Regent Street and Heathrow. Wholesale
includes the results of the UK and Japanese fabric businesses.


The Retail loss on ordinary activities before interest and taxation includes net
rental income from properties.


3.  EXCEPTIONAL OPERATING CHARGES

During the period ended 30th June 2003 the Group underwent a major restructuring
of its management and business operations. The statutory accounts for that
period included exceptional operating charges relating to redundancy,
recruitment and closure costs of £694,000. The amount was included in selling
and distribution costs in the Profit and Loss account. These costs are not
expected to re-occur.


4.  DIVIDENDS

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                           £'000            £'000        £'000
Undeclared non-equity preference
dividends                                     11               12           23
------------------------------------------------------------------------------

Due to a deficiency of distributable reserves in the Company, the preference
shares are currently in arrears of dividend for 3 1/2 years (£80,000). Payment
will be made when this deficiency is made good from future profits.


5.  LOSS PER SHARE


The basic and diluted loss per share figures are calculated by dividing the loss
after taxation and minority interests by the weighted average number of ordinary
shares in issue during the period and in the comparative periods of 22,602,808.

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                                        (restated)
Retained loss for the period               £'000            £'000        £'000
Loss for the financial period             (2,512)          (1,841)      (5,503)
Exceptional operating charges                  -                -          694
--------------------------------------------------------------------------------
Loss for the financial period
before exceptional operating
charges                                   (2,512)          (1,841)      (4,809)
================================================================================

Basic and diluted loss per share           pence            pence        pence
Loss for the financial period              (11.1p)           (8.1p)      (24.3p)
Exceptional operating charges                  -                -          3.0p
--------------------------------------------------------------------------------
Loss for the financial period
before exceptional operating
charges                                    (11.1p)           (8.1p)      (21.3p)
================================================================================


As the exercise price of share options is equal to or higher than the average
share price for the period and for comparative periods, the basic loss per share
and the diluted loss per share are the same.


6.  TANGIBLE FIXED ASSETS

                                          Long        Short    Fixtures &
                         Freehold    leasehold    leasehold     equipment       Total
                            £'000        £'000        £'000         £'000       £'000
Cost or valuation
At 1st July 2003           36,750       39,009          299         6,819      82,877
Additions                      25           32            -           405         462
Disposals                       -            -            -           (88)        (88)
---------------------------------------------------------------------------------------
At 31st December 2003      36,775       39,041          299         7,136      83,251
=======================================================================================

Depreciation
At 1st July 2003                -            -          (93)       (3,755)     (3,848)
Charge for the period        (366)        (347)         (16)         (458)     (1,187)
Disposals                       -            -            -            88          88
---------------------------------------------------------------------------------------
At 31st December 2003        (366)        (347)        (109)       (4,125)     (4,947)
=======================================================================================

Net book value
at 31st December 2003      36,409       38,694          190         3,011      78,304
=======================================================================================
Net book value
at 31st December 2002      38,085       36,678        221           3,237      78,221
---------------------------------------------------------------------------------------
Net book value
at 30th June 2003          36,750       39,009          206         3,064      79,029
---------------------------------------------------------------------------------------


7.  MOVEMENT ON RESERVES
                                                                        Profit
                                              Merger   Revaluation    and loss
                                             reserve       reserve     account
                                               £'000         £'000       £'000
Group
At 1st July 2003                              61,503         8,887     (27,727)
Loss retained for the period                       -             -      (2,512)
Transfers                                          -            (7)          7
Currency translation differences on
foreign currency net investments                   -             -          71
Unpaid non-equity preference dividends             -             -          11
-------------------------------------------------------------------------------
At 31st December 2003                         61,503         8,880     (30,150)
===============================================================================

All reserves of the Group are attributable to equity shareholders' interests.


8.  RECONCILIATION OF OPERATING COSTS TO NET CASH INFLOW FROM OPERATING ACTIVITIES

                                        6 months         6 months    12 months
                                           ended            ended        ended
                                   31st December    31st December    30th June
                                            2003             2002         2003
                                                        (restated)
                                           £'000            £'000        £'000

Operating loss                              (754)            (280)      (2,213)
Depreciation                               1,187            1,374        2,557
Loss on disposal of fixed
assets                                         -                -           57
Decrease in provisions                         -                -         (120)
(Increase)/decrease in stock                (259)            (517)         633
(Increase)/decrease in debtors              (391)           1,810        2,880
Increase in creditors                      3,073            2,364          812
--------------------------------------------------------------------------------
Net cash inflow from operating             2,856            4,751        4,606
activities                             -----------     ------------   ----------
================================================================================


9.  RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

                                           6 months         6 months    12 months
                                              ended            ended        ended
                                      31st December    31st December    30th June
                                               2003             2002         2003
                                                           (restated)
                                              £'000            £'000        £'000

Equity dividend paid to minorities             (236)          (172)          (172)
Non-equity dividend paid to
minorities                                        -              -           (132)
Bank arrangement fees                             -           (431)          (457)
Interest paid                                (1,163)        (1,458)        (2,806)
Interest received                                40             39             96
-----------------------------------------------------------------------------------
Returns on investments and servicing
of finance                                   (1,359)        (2,022)        (3,471)
===================================================================================


10.  FINANCING
                                6 months              6 months       12 months
                                   ended                 ended           ended
                           31st December         31st December       30th June
                                    2003                  2002            2003
                                   £'000                 £'000           £'000

Loans drawn down                       -                48,000          48,000
Loans repaid                           -               (45,000)        (45,000)
-------------------------------------------------------------------------------
Financing                              -                 3,000           3,000
===============================================================================


11.  ANALYSIS OF NET DEBT

                                                         Currency
                          31st December       Cash    translation    30th June
                                   2003       flow       movement         2003
                                  £'000      £'000          £'000        £'000

Short term investments            2,200      2,200              -            -

Cash                              2,701     (1,912)           100        4,513
-------------------------------------------------------------------------------
Cash at bank and in
hand                              4,901        288            100        4,513

Bank loan due after more
than one year                   (48,000)         -              -      (48,000)
-------------------------------------------------------------------------------
Net debt                        (43,099)       288            100      (43,487)
===============================================================================

12.  FINANCIAL INFORMATION

The financial information set out in these interim accounts of the Group for the
six months ended 31st December 2003 includes information for the period ended
30th June 2003. This information does not constitute the Company's statutory
accounts for the period ended 30th June 2003 but is derived from those accounts.
Statutory accounts for the period ended 30th June 2003 have been delivered to
the Registrar of Companies. The auditors have reported on those accounts; their
report was unqualified and did not contain statements under section 237(2) or
(3) of the Companies Act 1985.


13.  ACCOUNTS AND INTERIM ANNOUNCEMENT

A copy of the above document has been submitted to the UK Listing Authority, and
will be available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at The Financial Services Authority, 25 The North
Colonnade, Canary Wharf, London E14 5HS, telephone number 020 7676 1000.


The interim accounts of the Company are expected to be sent to shareholders at
the end of March 2004. The audited accounts of Retail Stores plc for the period
ended 30th June 2003 and further copies of these interim accounts are available
from the Company Secretary, Filex Services Limited, 179 Great Portland Street,
London W1W 5LS.



                      This information is provided by RNS
            The company news service from the London Stock Exchange