THE fading feel-good factor in Hong Kong and the impact of higher United States interest rates have dealt a double blow to luxury department store operator Lane Crawford International. The group saw net profits fall 46.9 per cent to $52.7 million in the six months to September 30, adding to the list of poor results reported by retailers recently. The worse-than-expected performance, which has prompted analysts to revise their full-year forecasts, has aroused further concerns over the depressed retail sector in the territory and some parts of the region. For Lane Crawford, some of the blame could be attributed to the US Federal Reserve Board's steady increase in interest rates, which hammered US bonds. The group suffered a 77 per cent drop in its share of income contributed from associates that invest in US government debt securities. Earnings per A share fell 46.9 per cent to 46.6 cents, while earnings per B share fell 46.6 per cent to 4.7 cents. The directors recommended an interim dividend of 25.5 cents per A share and $2.55 cents per B share, both flat compared with the previous year. Turnover climbed 15.21 per cent to $912.8 million, compared with $792.3 million previously. Operating profit slipped 4.7 per cent to $44.5 million, despite the group's aggressive marketing programme. Soaring rentals and staffing costs, coupled with consumers' decreasing disposable incomes due to high property prices and a stock market fall, have crushed the territory's retailers. Compounding the company's problems were its operations in Singapore and China, which have their own market difficulties. Company secretary Wilson Chan attributed the profit decline both to the general weakness of the sector and to an oversupply of retailers in Hong Kong and Singapore. He also blamed the start-up costs associated with the Times Square Express store and the group's new Singapore store, along with Hong Kong's ''abnormally wet summer'' this year. W I Carr analyst Alan Wong pointed out that the recent dips in the territory's property and stock markets had either slashed Hong Kong consumers' purchasing power or made them imagine their purchasing power had dropped. ''People feel poor,'' he said. An analyst with an US investment house expected the group's retail operating margin to fall this financial year from the previous 5.5 per cent. This was partly the result of the wide range of goods carried by the group. ''Its retail operating margin is not as good as some speciality stores,'' he noted. On Wednesday, department store operator Yaohan Hongkong reported a drop in interim earnings of 13.4 per cent for the six months to December 30. The same day, lingerie maker and retailer Top Form International announced plans to shut down 14 retail outlets in the region, including four in Hong Kong, after poor sales resulted in a 44 per cent profit drop for the year to June 30. In September, department store operator Wing On said first-half profits had fallen 38 per cent. At Lane Crawford however, the coup de grace was a drop in its share of interest income from associates, which stood at $12.9 million in the period, against the previous $56.1 million which was equivalent to 120 per cent of operating profit. One analyst said that operating profit had dropped because the group did not have an additional rental income this year as it did last year. Lane Crawford, a member of the Wheelock group, opened the Maison Mode department store and Lane Crawford designers' shop in Shanghai, plus the Escada shop in Beijing this year. The group's 200,000 sq ft Singapore store was officially opened in June, marking its first major extension of retailing activities into the region outside Hong Kong and China.