Home store Masters has warned that a lack of support from shoppers and government could force cost-cutting at the business.

And while the company reported an increase in profits of over 11 percent for the first six months of 2001, the hardware store said there had been a decline in sales in August and September.

And the company's president and chief executive officer Susan Wilson said that consumers had started to "tightning their belts" even before the September 11 terrorist attacks.

The directors of Masters also cautioned the shareholders that the second six months of the financial year were critical to the overall annual performance of the company, with over 26 percent of the annual sales earned in the months of November and December.

In the company's six month report, Ms Wilson said: "This halt in our tourism (both recreational and business) will have the affect of accelerating an already existing downward economic spiral.

"We are well positioned in the short term to "weather the storm" .

"However, without a commitment from the community to `Buy Bermuda' and without strong support from the Government in recognising that the most onerous tax burdens fall upon the beleaguered retail industry, then the company may be faced with a downturn that would force us to implement significant cost reductions."

The results to July 31, showed net income for the period amounted to $1,410,958; this result includes a one-time gain on the sale of investments of $906,347.

But the more telling figure of recurring net income amounted to $504,611 compared with $453,553 for the same six months a year ago, an increase of $51,058, or 11.25 percent, which the company attributed to the retail division.

Net sales to July 31st, 2001 were recorded at $6,045,106 compared with $5,696,734 for the same period last year, an increase of $348,372, or 6.1 percent.

Gross margin on sales for the same periods amounted to $2,221,499 in 2001 as compared with $2,122,506 in 2000, an increase of $98,993, or, 4.7 percent.

Ms Wilson warned shareholders of the company: "If the company cannot achieve sales similar to last year in these two months, then the annual result from operations will be significantly lower than a year ago.

"Whereas the first quarter of this financial period showed significant sales growth (attributable to the construction boom), we have seen sales in the most recent months (August and September) slide significantly from our expectations with the erosion having already commenced in June, 2001.

"The decline in sales is particularly noticeable in those products where consumer expenditure is somewhat discretionary - especially in those products associated with home decorating and textiles. There is every indication that consumers are `tightening their belts' and this phenomenon was definitely noticeable prior to the tragic events of September 11th."

She added that the directors of Masters were well aware of the challenges facing retail businesses in Bermuda.

Astatement added: "The company is committed to doing its part and we will adopt as many measures as are practical to encourage local buying while retaining our existing service levels. The directors, management and staff - our entire Masters Team - are determined to get through these difficult times."

The company also reported that during this current six month period, Masters decided to sell a portion of its marketable securities and retire almost all of its long-term debt, Ms Wilson said. She added: "It is expected that we will have completely retired our mortgage by early 2002."

And in the same report the company reported on its ceased operations at the Collector's Hill Service Station adding the lease with the new landowner was not renewed.