Hallenstein beats summertime blues

Clothing retailer Hallenstein Glasson says first half earnings were up a quarter from last year. Photo / NZ Herald

Clothing chain Hallenstein Glasson has become the second major retailer in a week to shrug off what others have called a challenging Christmas trading period by saying it expects to report a 25 per cent boost in first-half earnings.

The company said group sales for the six months to February 1 came to $108.56 million, 7.9 per cent higher than the previous corresponding period.

Chief executive Graeme Popplewell said the sales boost had been achieved despite a difficult retail environment in New Zealand and Australia.

In particular, record Christmas sales and a strong January had underpinned performance in the New Zealand market, he said.

Net profit after tax for the period is projected to be in the range of $8.7 million to $9 million, an increase of about 25 per cent.

Gross margin on sales was 57.1 per cent, up slightly from the previous corresponding period. But the company said it would be difficult to maintain its earnings momentum for the rest of the financial year.

"A consumer conditioned to paying less than full price, rising rents, wages, and the increased cost of goods from China in particular will present us with some real obstacles to overcome moving forward," Popplewell said.

Hallenstein Glasson's full result for the half year will be released on March 28.

The company's earnings guidance follows the Briscoe Group's announcement last week that a strong finish to the year would drive its net profit up by at least 25 per cent.

Fourth-quarter revenue lifted the homeware and sporting goods retailer's annual sales by 4.5 per cent to $438 million, which would result in full-year profit of at least $27 million, the company said.

Upbeat comments from Hallenstein Glasson and Briscoes were in stark contrast to those of The Warehouse, which cut its guidance on adjusted profit for the current financial year, blaming a squeeze on margins in recent months.

The discount retail giant said last week that it expected an adjusted net profit of between $62 million and $66 million for the year ending July 27, down from a previous forecast of $70 million.

Buffy Gill, a retail analyst at Goldman Sachs NZ, said The Warehouse was losing out online and to bricks and mortar competitors.

She said Briscoes enjoyed the benefits of last year's Rugby World Cup with its Rebel Sport retail chain over the six-month period.

In addition, Hallenstein Glasson's first-half earnings report would look good compared with the previous corresponding period, which was flat.

Gill noted Hallenstein Glasson's higher than expected operating costs, which she said were most likely caused by rising rents and wages.

She also expected the company to consider closing a handful of stores over the next 12 to 24 months, choosing instead to reach its customer bases through online sales.

Another company to strike a rough patch over the festive season was outdoor goods retailer Kathmandu, which said on December 22 that trading in the lead-up to Christmas had not met management expectations.

Kathmandu's chief executive, Peter Halkett, said then that the retail environment had become increasingly difficult in both Australia and New Zealand.

IN FASHION
Hallenstein Glasson:
* $108.56m group sales for six months to February 1.
* 7.9pc increase on previous corresponding period.
* $8.7m to $9m projected net profit for the period.