Hallenstein downgrades again

Hallenstein Glasson, pictured in George St, Dunedin, yesterday, has issued two profit downgrades during the past eight weeks. Photo by Craig Baxter.
Hallenstein Glasson, pictured in George St, Dunedin, yesterday, has issued two profit downgrades during the past eight weeks. Photo by Craig Baxter.

A surprise December sales slump has prompted a second profit downgrade by clothing retailer Hallenstein Glasson, which has slashed profit guidance by almost 40%.

Following the announcement, Hallenstein's share price plunged more than 15%, shaving 65c off its share price to trade around $3.60 and closed further down, at $3.50. Since a year-high of $5.73 in April, Hallenstein shares had shed almost 39% in value to trade at $3.50.

It was the second profit downgrade issued by the company within eight weeks.

Hallenstein chief executive, Graeme Popplewell, said December sales were down 10% on the previous December and reforecast after-tax profit for the half-year trading to February would subsequently be down 39%, falling from $10.3 million last year to a range of $6 million to $6.3 million.

''The business has actively undertaken a review of the performance of all brands and identified areas that were a factor in this downturn. Steps are being put in place to rectify these areas,'' he said.

Recent retail data, from Statistics New Zealand and also electronic payments processor Paymark, revealed about a 1% increase in December electronic retail transactions, including apparel.

Craigs Investment Partners broker Peter McIntyre said Hallenstein's sale slide reinforced how fragile the retail sector remained in general.

''For a long time now Hallenstein's was seen as a safe pair of hands. This is not the type of [financial] guidance investors wanted to see,'' he said.

In mid-November, Hallenstein said ''subdued trading'' since August meant a likely 20% profit downgrade, from last year's $10.3 million to $8 million, an announcement which also took the market by surprise.

Mr McIntyre had expected a stronger Christmas period and full-year after-tax profit to be down only 6%, to $17.6 million.

He noted there was no detail provided on where sales weakness was experienced, but Hallenstein had previously said most of the recent decline was felt across its womenswear business.

''We suspect increasing competition from online retailing is really starting to impact on Hallenstein's,'' he said.

Forsyth Barr broker Suzanne Kinnaird said Hallenstein's second profit warning followed weak December trading, negatively affecting sales and margins across all three chains.

''We viewed that trading conditions would remain tough over Christmas for apparel retailers. However, it proved to be worse than we, and the company, feared,'' she said.

For its previous full-year, despite a 2% sales boost to $220 million for the year to August, Hallenstein's after-tax profit fell 11% to $18.7 million.

Hallenstein's trading result for the six months to February is scheduled for release on March 25.

simon.hartley@odt.co.nz

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