The Clerys department store group in Dublin has gone into the red with annual pretax losses of €742,875 following a marginal decline in sales to €35.3 million.

The deficit was recorded despite the boom in spending, in which retailers are thriving, and the revival of the Henry Street shopping district across the road from Clerys' landmark store on O'Connell Street.

The company's board blamed the losses in the year to the end of last January on "extremely difficult" trading conditions at the O'Connell Street store, whose €22 million refurbishment was completed last November.

While the directors indicated that business has started to recover, the latest accounts show that Clerys losses were incurred in the period that the company completed its first full-year of Sunday and public holiday opening.

The Clerys board cited Luas works, the O'Connell Street redevelopment and the Dart upgrade, with services suspended at weekends, as factors contributing to the company's difficulties.

However, accounts seen by The Irish Times indicate that the Guiney's store on Talbot Street adjacent to O'Connell increased its profits. The At Home with Clerys outlets in Leopardstown and Blanchardstown also increased their profits.

The specific level of profits at these stores was not outlined.

The accounts for Clery & Co (1941) plc are the first to appear since the death last August of its chairwoman for 63 years, Mary Guiney, who at the age of 103 retained a controlling interest in the company.

Senior retail industry sources believe Mrs Guiney's death will ultimately lead to a restructuring of the company. However, the directors' report with the latest accounts said only that the board mourned her passing away.

Some rival retailers have run the rule over the O'Connell Street store, although the company has indicated publicly that it intends to maintain the independent stance of Mrs Guiney, who fought off several takeover attempts.

"The directors do not envisage any major developments during 2005," the board's report said.

The accounts show that Clerys' overall turnover fell by €133,607 to €35,298,436 in the year. Net of sales taxes, turnover fell by €128,281 to €29,246,798.

The pretax loss contrasts with a marginal pretax profit of €118,538 the previous year.

After a taxation credit of €57,262, the company had a net loss of €685,613, down from a net profit a year earlier of €71,957. Dividends cost €510,400 in the year.

"Trading continued to be extremely difficult in our flagship O'Connell Street store due to the disruption caused by the Luas construction, the O'Connell Street redevelopment and the Dart upgrade," the directors' report said.

"The O'Connell Street works are now in their fourth year and are finally due to be completed in mid-2006. The vacancy rate on O'Connell Street is a testimony to the level of difficulty experienced on the street during this period.

"Business has started to recover and the directors are confident that, upon completion, O'Connell Street will attract new business and prosper."

The directors went on to say that they were concerned at the increase in business costs "which continue to rise at rates considerably in excess of inflation while the retail business, particularly fashion, has experienced significant deflation".

Their report continued: "The board is urging Government to tackle the high costs of rates, electricity and insurance."

The company did not make anyone available last evening to comment on the results.