Retail Week has reported that like-for-like sales dropped six per cent in the year to March 31st following a difficult second half, when it posted a 12 per cent decline compared to a five per cent rise in the first half.
Since the year-end, Hamleys’ sales have picked up and seen a five per cent rise in the three months to June 30th.
The £7.1m loss included charges relating to restructuring and to a lease provision for a store inherited from Bear Factory in Watford.
It also included £3.7m of interest, £2.7m of which was shareholder interest and is not payable unless the company is sold.
Chief executive Gudjon Reynisson commented: “It’s been a year of two distinct halves. The credit crunch came along but we reacted very quickly with cost-saving initiatives and we managed stock very well, so we’re in a positive cash position.
“I’m extremely happy with our performance and really pleased with sales this financial year. We’ve focused on range building, and enjoyed an uplift because of tourist traffic.”
The retailer doubled its own-brand lines in the period from 15 per cent of sales two years ago to 30 per cent currently.
Alongside the own brand strategy, the firm is looking to expand its store portfolio, with plans to add stores in Glasgow and Mumbai. It is also negotiating a site in Cardiff’s St David’s 2 development.
The company also intends to open stores in regional centres, such as Leeds and Manchester, while opening more travel stores in airports and railway stations and searching for international franchise partners.
Meanwhile, Reynisson is the latest to join The Telegraph's call for the VAT reduction to be extended.
Reynisson said the planned increase back to 17.5 per cent on January 1st should be postponed until consumer confidence has returned.
He said: "My view is that they should extend it. The reason for the cut in the first place was to boost consumer confidence. It should not be raised until consumer confidence returns."