Hallenstein Glasson shares slumped after the clothing retailer warned its first-half profit had fallen around 20 per cent, with analysts saying a highly competitive environment was hurting the business.
The company posted a trading update yesterday, dropping its first-half profit guidance to between $6.6 million and $6.9 million for the six months ended February 1, down from $8.6 million a year earlier. Chief executive Graeme Popplewell blamed a weaker New Zealand dollar and increased competition.
The company's shares fell as low as $2.85 yesterday before eventually closing down 27c at $2.95.
First Retail Group managing director Chris Wilkinson said it was an issue across the industry.
"Online spending is growing and that's not to say that Hallenstein Glasson aren't doing a good job with their omni channel, because they are ...
"It's a tough one because when you look at what Hallenstein Glasson is doing, its doing the right things as far as its product range is concerned, its service, its whole brand persona, but it's just a very difficult market and consumers are fair-weather friends," he said. "There's only so much money to go around."
Wilkinson said New Zealand needed to look at its GST rules around online buying to limit the effect this was having on local retailers.
Hallenstein Glasson said sales edged up 1.3 per cent to $112.4 million, and increased 2 per cent in the key trading month of December, but the gross margin for the period was almost 4 percentage points below the same period last year.
"Sales were not too bad but the margin equation is not good and I would imagine that the weakness in the New Zealand dollar has a fair amount to do with that," said Grant Williamson, a director at Hamilton Hindin Greene.
I think some investors will be looking to pick up some bargain basement prices on Hallenstein.
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"While exporters are doing very well on the back of the weak New Zealand dollar, importers like Hallenstein suffer quite a bit. The market hasn't taken kindly to that announcement."
Williamson said Hallenstein had faced hits to its earnings in the past and recovered.
"They are pretty smart managers. They have been in the apparel game for quite some time so they normally manage to turn around that performance and then we see the share price improve, so I think some investors will be looking to pick up some bargain basement prices on Hallenstein," he said.
The first-half dividend forecast was reduced to 13.5c per share, from 14.5c last year.
The retailer, which operates the menswear chain Hallensteins and the women's fashion brand Glassons, will publish its full earnings on March 23.