Downturn to hurt, says fashion retailer

Fashion retailer Hallenstein Glasson has warned shareholders it won't be spared from an economic slowdown next year.

But it eased the pain by reporting a 7.9 per cent jump in group sales for the four months to November 30, as Australian sales leaped by nearly a third.

It also signalled it could be closer to developing or acquiring new businesses in the apparel sector.

Chairman Warren Bell told shareholders at the company's annual meeting in Christchurch that despite commentaries predicting a decline in consumer spending, same-store sales rose 5.8 per cent in the first four months of the financial year, and sales were up 7.9 per cent when the effects of new stores were included.

That was largely driven by a buoyant Australian operation, where same-store sales were up 13.5 per cent compared to a 4.9 per cent increase in New Zealand.

Bell said that with crucial Christmas sales yet to make their impact, it was not possible to give an accurate prediction of first half profit, despite the sound performance so far.

"We also need to acknowledge that the Reserve Bank is trying to dampen demand, and consumer spending is very much dependent on sentiment and confidence," said Bell. "There are signs in the marketplace that the economy is slowing and it would be naive to think we will be spared any impact as we move into 2006."

Investors wary of an economic headwind sent Hallenstein shares 4c lower to close at $4.41 each, despite the jump in sales.

The company's profit has grown 68.4 per cent in the past two years under benign economic conditions.

But Bell said the economy could not be viewed with anything but caution.

"Almost every newspaper you care to read has dire warnings of a collapse in consumer confidence. The only question seems to be a matter of timing as to just when that will happen," he said.

Interest rates continued to rise and personal debt was reported to be at an all-time high. Against that stood record employment and ready access to borrowed money as foreign capital chased New Zealand's high-yield currency, which continued to drive the economy.

Nevertheless, Bell said the Australian economy had better fundamentals and, therefore, a greater capacity to grow in the future, while the improvement in same-store sales there gave the company the confidence to push further in that market.

The "daunting task" of developing Glassons in Australia had seen a sub-committee of the board set up to pay special attention to that business. The board was also considering appointing an Australian resident with local knowledge of the retail sector as a director to assist the expansion.

Attention was also being paid to new opportunities.

"We have previously signalled that the board has an open mind towards developing or acquiring other businesses in the apparel sector. We have identified certain segments we believe we could profit from, and the executive is working on projects to build a sustainable business case."

Despite caution over the economic outlook, Bell said Hallenstein Glasson would continue to aggressively retain and grow market share and manage inventory to improve the business.