Hallenstein shares up despite big profit fall

Hallensteins clothing store on Queen St, central Auckland. Photograph by Sarah Ivey

Hallenstein Glasson, which posted a 24 per cent drop in annual profit, said all chains in the group are trading ahead of year earlier levels in the first seven weeks of the new financial year, with a "solid improvement" in its gross profit margin. The shares jumped 9.2 per cent.

Net profit fell to $14.3 million, or 23.94 cents a share, in the year to August 1, from $18.7 million, or 31.3 cents, a year earlier, the Auckland-based company said in a statement. The profit was above the company's forecast of $14 million to $14.2 million. Sales fell 5.5 per cent to $208 million.

Hallenstein, which operates the Hallensteins, Glassons and Storm clothing chains in New Zealand and Australia, said annual profit declined after an improvement in the second half was unable to make up for a weak first half when poor December sales contributed to a 40 per cent drop in first half profit. Still, the start of the new financial year has been "encouraging" with group sales up 4 per cent on the prior year, it said.

The 2013/14 financial year had been "extremely challenging with all the brands in the group failing to deliver expected results," chief executive Graeme Popplewell said. "Whilst there have been external influences that have been detrimental to trade, the majority of the difficulties we have faced have been due to internal factors that saw poor execution of planning and buying, particularly in the first half of the year.

See the latest Hallenstein Glasson financial results here:

"We have taken appropriate steps to ensure there is no reoccurrence of those circumstances and are starting to see the results of those efforts."

The business is in a stronger position than it was at a comparable stage last year, and further guidance will be given at the annual meeting in December, he said.

Shares in Hallenstein Glasson jumped 26 cents to a seven-week high of $3.10. The stock has declined 27 per cent so far this year.

The company is conducting a global search for a new chief executive for its Glassons womenswear chain after Tracy Shaw resigned last month for family reasons. Shaw had been in the role only since February and her appointment after a 15-month global search has previously been heralded by Popplewell as being an important element in returning Glassons to a satisfactory performance. Shaw replaced Di Humphries who left in October 2012 to head children's clothing chain Pumpkin Patch.

Glassons New Zealand's profit dropped 14.5 per cent to $7.1 million as sales fell 5.2 per cent to $83.6 million. The company said most of the decline was in the first half, when profit fell 34 per cent, while second-half profit gained 9 per cent.

Glassons Australia's net loss widened to $1.5 million from $1.2 million, although the net loss narrowed to $262,000 in the second half, from $1.5 million in the first half, it said. Sales slid 13 per cent to $35.6 million. In Australia dollar terms the sales decline was 1.7 per cent as a higher New Zealand dollar crimped returns.

Annual profit at the Hallensteins menswear chain slipped 19 per cent to $7.4 million as sales declined 1.8 per cent to $80.1 million as a warmer than expected winter dented sales of seasonal clothing. In the second half, sales increased 2 per cent and profit fell 8 per cent.

Meantime, profit more than halved at the company's Storm clothing chain, to $680,000 from $1.6 million the year earlier as sales slid 7.4 per cent to $8.6 million.

"Considerable focus has gone into reversing this trend and we are now seeing sales return to historic levels," Popplewell said.

The company will pay a final dividend of 16.5 cents on Dec. 5, down from 17.5 cents last year.