Many New Zealand retailers are reflecting the signs of difficult trading, with flat revenues, squeezed profit margins in the face of domestic, internet and international competition, and rising commercial rents.
Hallensteins' sales revenue was up 7.9% at $108.57 million for the period and its after-tax profit grew 26.5% to $9 million, underpinned by record Christmas sales and strong January trading from New Zealand operations.
While delivering a strong result, Hallensteins chief executive Graeme Popplewell also raised a cautionary note, that Australian outlets had yet to return to an acceptable level of profitability and it would be "a difficult challenge to continue the earnings momentum" for the second-half trading period.
"In both New Zealand and Australia, fiscal policy will do little to improve consumer spending, and the negative impact of reduced government spending is beginning to be felt," Mr Popplewell said in a statement yesterday.
Hallensteins lifted its interim dividend from 14c a year ago to 14.5c, and saw its share price steady at $4, following yesterday's announcement.
Forsyth Barr broker Haley Van Leeuwen said the stronger sales results - up 7.9% overall - were helped by an improvement in the Australian market, where Hallensteins is increasing its market share.
"[However] the outlook for the retail environment is it's still a tough place to be, with consumers conditioned to paying less," she said.
Much would depend on the autumn/winter season.
Hallensteins largest business, Glassons New Zealand, had a strong second-half skew toward sales and profits, she said.
Craigs Investment Partners broker Peter McIntyre said it was "strong" result from Hallensteins and was in line with its own guidance and expectations from February.
Hallensteins remained a conservatively run business, carried no debt and ended the period with cash in hand of $22.3 million, Mr McIntyre said.
"They've met customer demand with their product lines, hit the right inventory levels and reduced stock at sale time. Hallensteins consistently deliver and know their market well," he said.
As with other main-street and CBD retailers in recent weeks during the reporting season, Mr Popplewell took a swipe at commercial landlords.
"The embedded practice of annual rent increases in excess of CPI [consumer price index] that major shopping centre owners are enjoying is increasingly making specialty retail in some centres a marginal proposition.
"In common with other retailers, we are carefully reviewing our store portfolio," he said.
Aside from rental increases, other "obstacles" in the year ahead included consumers now being conditioned to pay less than full price, [flat] wages and the increased cost of goods, he said.
Also in line with other retailers' efforts, Hallensteins' internet sales are beginning to play a bigger role and "strong progress" was made in growing those sales during the past six months.
During the period, there was refurbishment of two Glassons and one Hallensteins store, Storm opened a Dunedin store, and at the end of the month Glassons will open a newly refurbished store in Queen St, Auckland.
In Australia, another Glassons store was opened in Melbourne this month and the first Queensland store is scheduled to open today.
Hallenstein Glasson
COMPANY DIVISIONS
Glassons New Zealand: Sales up 7%. Profit after tax up 18.6% to $4.08 million
Glassons Australia: Sales up 13%. Loss after tax of $204,000
Hallensteins: Sales up 5%. Profit after tax up 18% to $4.24 million
Storm: Sales up 27%. Profit after tax up almost 70% at $476,000.
Property: Profit after tax down 9.6% at $423,000.
