Coats unravels on profits warning

SHARES in UK textile company Coats dropped nearly 5% after it warned investors its annual profits would fall short of last year's. However, Coats said it was too early to put its fashion brands Jaeger and Viyella up for sale.

Shares in the company fell below an eight-week low of 48p, down 2 1/2p to 47 3/4p. Coats said its main industrial thread business continued to suffer from lower demand in the US and Europe, while fashion sales in the US and central London had also fallen since the 11 September terrorist attacks.

'Overall, we now expect the group's profit before tax and exceptional items to be slightly below last year,' the company said.

Coats, which has shut several plants to cut costs, posted a £50m pre-tax profit last year. The company said in September it expected improved results from its fashion unit in the second half of the year. Coats chief executive Martin Flower said: 'In the longer term, we are going to focus very much on our global thread business.' But he added that it had no immediate plans to sell its fashion retail arm, which includes the Jaeger and Viyella brands.

'We are retaining Jaeger and Viyella for the time being. We think those businesses would benefit from a period of continuity in the group,' he said.