Withering profit margins have seen clothing retailer
Hallenstein Glasson book an 11% plunge in after-tax profit,
despite a 2% boost to total sales to $220 million.
As the listed companies' reporting season draws to an end,
retailers, such as Kathmandu and Hallenstein Glasson are
revealing a fine balancing act between maintaining or
boosting revenues and the effects of discounting and
subsequent erosion in profit margins.
Children's clothing retailer Pumpkin Patch is due to report
today. A late start to a relatively mild winter appears to
have caught out many clothing retailers.
Hallenstein Glasson sales were up 2% to $220 million while
profit before tax slid from $29.3 million to $25.9 million
and profit after tax fell 11% to $18.7 million.
Despite the earnings decline, Hallenstein Glasson will pay a
final dividend of 17.5c per share, boosting the full year
dividend to 33.5c per share, slightly less than a year ago.
Its shares were down almost 2% at $4.25 following the
Forsyth Barr broker Suzanne Kinnaird said it was a
''disappointing result'' against the same period last year,
which was driven by ''very weak'' trading in womens-wear
during the second half of 2013.
''Earnings before interest and tax [ebit] at Glasson New
Zealand in the second half of 2013 was down 43% on a year
ago, Storm was down 14% and Glasson [Australia] reported
negative ebit of $800,000, compared to ebit of $800,000 a
year ago,'' she said.
Hallenstein Glasson's chief executive Graeme Popplewell
painted a sobering picture for the start of the present
financial year, saying the first seven weeks' trading had
been difficult, with group sales down on last year by 9%.
''While this period does not have a significant impact on
earnings for the future period, it does demonstrate how
competitive the environment is at present,'' he said in a
Craigs Investment Partners broker Peter McIntyre said the
likelihood of a 10% profit decline had been signalled in June
by the company, but the warmer winter and mounting margin
pressures had pushed the forecast out further.
While Hallenstein Glasson remained debt free, and having
closed three outlets, Mr McIntyre said it was ''significant''
the cash position had declined from $25.9 million a year ago
to about $19 million.
Mr Popplewell said both Hallensteins and Storm brands
performed to expectations, but Glasson in both New Zealand
and Australia felt ''the full brunt of a record mild winter''
and aggressive discounting in the women's wear marketplace
during the past six months.
Ms Kinnaird said the profit, down 11% on last year, was due
to difficult trading conditions, margin pressure at Glasson
and a late start to winter.
''The repositioning of the Hallensteins brand continues to
show positive results,'' Ms Kinnaird said; noting the
company's net cash balance of $19 million and being debt