Hallenstein shares up on bullish sales update

Signage above Hallensteins clothing store on Queen St, central Auckland. New Zealand Herald Photograph by Sarah Ivey

Shares of Hallenstein Glasson rose to a year high after the retail chain said it expects first-half earnings to rise by about a third after robust Christmas trading with positive growth continuing through January.

Post-tax earnings may rise to between $8.1 million to $8.3 million in the six months ending Feb. 1, from $6.2 million a year earlier, the Auckland-based company said in a statement. The shares rose as high as $3.60, and were recently up 9.2 per cent at $3.45.

Hallenstein expects earnings to rebound following a 40 per cent slump in first-half profit last year when increased rivalry during the summer season pushed down prices. During the latest summer season from August 2014 through to January 2015, sales were up 3.8 per cent on the year earlier, the company said.

"Sales over the key Christmas trading period have been robust, and January has continued to show positive growth over the prior year in both New Zealand and Australia," chief executive Graeme Popplewell said. December sales were 8 per cent ahead of the year earlier "with January results continuing in a similar vein," he said.

Hallenstein has been one of a number of retailers that struggled through 2014 in a tough trading environment as they faced intense competition from online rivals, thrifty Australian consumers and unfavourable weather conditions.

Rickey Ward, NZ equities manager at JBWere New Zealand, said the announcement was better than what the market was expecting, and bucked the trend among other retailers.

"People were starting to say well your dividend payment's quite high relative to earnings expectations and if they had had a further decline in retail sales, you'd have to say that dividend yield is unsustainable," Ward said. "It's the dividend yield that was attracting people to it as an investment, that's why the share price rebounded, because investors should feel comfortable they're going to get their income stream."

The stock is rated an average 'buy' based on five analyst recommendations compiled by Reuters, and was recently trading at a gross dividend yield of 12.53 per cent.