Hallenstein profit dips on weak Glassons sales

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Hallenstein Glasson Holdings posted a 17 per cent drop in first-half profit, meeting the clothing retailer's guidance, as 'intense' competition for women's apparel forced it to cut prices to maintain sales.

Profit fell to $7.1 million, or 11.96 cents a share, in the six months ended Feb. 1, from $8.5 million, or 14.33 cents a year earlier, the company said in a statement today.

Sales fell 1.7 per cent to $100.6million.

Earnings were within the $7 million-to-$7.4 million range the retailer gave on January 26, when it said weaker sales at its Glassons women's clothing chain more than offset a better performance at its Hallenstein and Storm stores.

Still, the company held its interim dividend unchanged at 14 cents, even though it will have to dip into cash reserves to make the $8.35 million payment.

"The sales results during this period are critical to achieving our profit and this year we struggled to achieve our targets," said chairman Warren Bell."

Competition was particularly intense in women's apparel and we had to meet the market to ensure our inventory levels remained under control."

Shares of Hallenstein didn't immediately trade after the results and were last at $3.71.

They have declined about 9 per cent this year, while the NZX 50 Index rose 1 per cent.

The stock is rated a 'hold' based on the consensus of four recommendations compiled by Reuters.

The record date for the first-half dividend is April 8, with the payment scheduled for April 15.

The company said its cash reserves shrank to $20.2 million in the first half, from $34.9 million, mainly due to the requirements of overseas suppliers, who were demanding earlier payment to secure orders because of fluctuations in the price of cotton.

In New Zealand, the retailer's Glassons chain had a 6.1 per cent decline in first-half sales, while profit fell 24 per cent, mainly reflecting difficult trading over the key Christmas season.

In Australia the chain's sales fell 5.6 per cent, pushing it to a loss of $652,000, with "very strong competition in that market for the two months leading up to and during Christmas."

The Hallensteins men's clothing store lifted sales by 3.7 per cent and profit by 16.7 per cent, helped by a new management team, the appointment of a new advertising firm and new branding, it said.

Its Storm outlets boosted sales by 27 per cent, as it opened new stores, and profit rose by 32 per cent.

Same-store sales climbed 4.7 per cent.

The company said seven of its stores remain closed following the Christchurch earthquake on February 22 and the tremor disrupted all 14 stores the city.

Insurance for loss of profits and material damage is in place which will protect earnings for the current financial year, it said.

So far in the second half, sales are little changed, after adjusting for stores closed by the quake, the company said.

Its Glassons chain in Australia has shown "a steady improvement" since January, though it said the general economic environment "can best be described as challenging."

"We have a business with a clean balance sheet, highly experienced management and the strength to compete in what we see will be a very demanding market over the balance of the year," it said.