Clothing retailer Hallenstein Glasson said its net profit rose by 26.5 per cent in the first half, but warned that maintaining its momentum for the rest of the financial year would be challenging, particularly as the effects of reduced government spending started to bite.
The $9.03 million net profit was slightly ahead of the company's own guidance, issued in February, which was for a net profit of $8.7 million to $9 million.
The company declared an interim dividend of 14.5c a share, up from 14c last year.
Group sales for the six months ended February 1 were $108.57 million, an increase of 7.9 per cent over the previous corresponding period, which chief executive Graeme Popplewell said was achieved in the face of a difficult retail environment in New Zealand and Australia.
Record Christmas sales and a strong January had helped to underpin the company's performance in the New Zealand market, he added.
Looking ahead, Popplewell said the first eight weeks of the new season had shown sales growth of 7 per cent, but he said it would be difficult to continue the earnings momentum over the rest of the financial year.
Market share in Australia was improving and so were sales, but he said there was still some way to go before the company would achieve an acceptable level of profitability there.
"In both New Zealand and Australia fiscal policy will do little to improve consumer spending, and the negative impact of reduced government spending is beginning to be felt."
Popplewell said consumers conditioned to paying less than full price, rising rents, wages, and the increased cost of goods in particular would present the company with some real obstacles to overcome in the future.
Sales on the internet continued to present an opportunity and progress had been made over the past six months in growing online sales.
Forsyth Barr analyst Guy Hallwright said the result was against the background of a weak first half in the previous corresponding period, and that was probably the reason for the company saying it was going to have trouble maintaining momentum.
"They manage to get the right products in at the right price and shift them quickly at reasonable prices," he said.
New store fit-outs for the Glassons chain might have also made a difference, he said.
Hallwright expects the company to report a net profit of around $21 million for the 2011/12 year, which would be an improvement on the previous year's earthquake-affected net profit of $18.3 million.
Trading has been a mixed bag for retailers over the past year.
This month, The Warehouse reported that its unadjusted interim profit fell to $46.7 million from $53 million in the previous corresponding period, and Kathmandu, the outdoor equipment and clothing retailer, posted a 43 per cent slump in first-half earnings.
Around the same time, Briscoe Group, the homeware and sporting goods retailer, posted a 27 per cent increase in its annual net profit to $27.5 million.
Shares in Hallenstein Glasson closed up 2c at $4.02 yesterday.