UPDATE 1-UK's Alexon profit slumps on tough trading

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LONDON, Sept 24 (Reuters) - Alexon Group Plc (AXN.L), the British clothes and footwear retailer, posted a 40 percent percent fall in first-half operating profit on Wednesday and said trading had continued to be tough in the second half.

For the 26 weeks to July 26, the retailer whose brands include Dash and Bay Trading made an operating profit of 5.2 million pounds ($9.6 million) compared with 8.7 million in the same period last year, as group sales and like-for-like sales fell 5 percent and 7.3 percent respectively.

"This is a challenging trading period for retailers, however ... I am confident that the group has excellent prospects over the medium and long term," said Chief Executive Jane McNally, who took over from John Osborn in June.

McNally predicted that Alexon's target markets of women over 65 and the young teens to twenties would rise in the medium-term and said these markets had "historically demonstrated good resilience in difficult economic times".

The clothes and footwear specialist said it had cut its interim dividend by a third to 1 penny and said it would review both the dividend for the full year and its future dividend policy when its full-year results are announced in March 2009.

"The classic brands in department stores have been under pressure and the poor weather will not have helped young fashion at Bay Trading," said Dresdner Kleinwort analyst Sanjay Vidyarthi.

Shares in Alexon, which have shed 44 percent of their value since the turn of the year, closed at 49-1/4 pence on Tuesday. The stock has underperformed the FTSE All Share general retailers index .FTASX5370 by over 17 percent since the start of 2008. (Reporting by Rhys Jones; Editing by David Holmes)