Colorado profit slumps 19pc

MELBOURNE - Australian clothing and footwear retailer Colorado Group posted a 19 per cent fall in annual profit on soft trading conditions and competitor discounting and forecast a challenging first half in fiscal 2007.

The company, whose store brands include Colorado, Mathers, Williams, Jag and diana ferrari, said the competitive retail market was likely to continue, but improvements in its own operations would drive a stronger second-half.

"This half will be about consolidation and then I expect that we will see growth in the second half," chief operating officer Eddie MacDonald said.

The company is looking both internally and externally for a new chief executive after Rowan Webb did not renew an employment contract that was due to end this month.

"The board are expecting to appoint someone by the third quarter, and I am in the running for the position," MacDonald said.

Colorado was hit by weakness in the men's footwear and apparel categories, but said it was also affected by its own problems including offering too wide a range and drifting away from a focus on its main brands.

Colorado's net profit for the year ended January 28 was A$35.56 million ($40.87 million) from A$43.97 million a year ago. One-off items including an accounting change also contributed to the fall.

MacDonald said the company was fixing its own internal problems and had a strong balance sheet that put it in a good position to make acquisitions in footwear or apparel, either at the retail or wholesale level.

He said retailers needed size to offset price falls as more product was sourced from China and to offset the bargaining power held by shopping centre landlords. "I think consolidation in our sector is inevitable."

MacDonald said erratic competitor behaviour also pressured prices, as recently seen with department store chain Myer which was sold this month by parent Coles Myer to a private equity consortium for A$1.4 billion.

"They discount their way to glory and that drives price deflation right through the industry," he said.

MacDonald said it was too soon to tell if Myer's market behaviour would change under the new owners.

"You would like to think so. A healthy Myer is great for the industry," he said.

- REUTERS