Omicron slams Hallenstein Glassons' NZ profit

Retailer says it had to battle a difficult trading environment over the past year. Photo / NZME

Hallenstein Glassons Holdings (HLG) revealed its New Zealand profit plummeted by 64 per cent in its Glassons stores due to pandemic struggles during the 12 months ended August 1.

HLG's chief executive, Stuart Duncan, told the NZ stock exchange (NZX) that the retailer had to battle a difficult trading environment over the past year, with Omicron surges impacting staffing and changes to customer shopping habits, particularly in the NZ market.

In the 12 months ended August 1, NZ's net profit came to just $4.1 million, a huge loss of 64.7 per cent on the prior corresponding period, which was $11.6m. NZ sales were a touch better but were still down 13 per cent to $104.4m. In Australia, net profit climbed in a more positive direction, up 16.4 per cent to $19.1m, with sales for the Australia region also rising 17.4 per cent to $156.9m.

HLG opened its first South Australian Glassons store, in Adelaide, in September 2021. In addition, new stores opened in the western Sydney suburb of Penrith, New South Wales, and Canberra in the first half of 2022. One store in Sydney was closed in March, the company said.

HLG's total net profit fell 23.2 per cent to $25.6m in the 12 months ended August 1, a fall from $33.3m a year earlier. But group sales barely moved from the previous corresponding period, coming in at $351.2m, which was up just 0.1 per cent from $350.8m in 2021.

Duncan said to achieve sales that were on par with the prior year was "pleasing" given the "numerous challenges" faced in the year.

Sales were adversely impacted by the numerous lockdowns in both NZ and Australia in the first six months of the year ended February 1, as stores were forced to close and 5,432 trading days were lost, resulting in a decrease of 6.2 per cent in sales from the prior year.

However, sales in the second half of the 2022 financial year were up 6.6 per cent from the same period last year as all stores remained open.

The company told the NZX that gross margins had "held steady" during the year at 57.6 per cent, compared with 57.4 per cent in the prior year. Duncan said in the company's statement that there was a focus placed on negotiating "better prices" with suppliers, which had helped to hold the gross margin. But this was offset by increased freight costs and shipping delays, which had resulted from the ongoing global impact of Covid-19.

"During the financial period, significant effort was made to reduce operating costs and inventory levels were well managed to preserve liquidity," he said.

"The higher inventory balance at year-end is due to goods in transit at the balance date in order to ensure certainty of product availability during the upcoming peak trade period."

For Hallenstein Brothers, net profit fell to $2.1m, down 56.6 per cent from a year earlier. Sales were $89.9m, for both NZ and Australia, dropping just 7.6 per cent from the prior corresponding period. Online sales grew more than 16.1 per cent over the previous year, with "significant growth" experienced during the periods when the stores were shut.

Duncan said the first two months of the 2023 financial year had seen group sales jump by 68.5 per cent from the prior year.

"Last year, there were multiple store closures for much of the eight-week period across Australia and New Zealand due to lockdowns, so the percentage increase is not directly comparable," he noted.

He said HLG was looking forward to a year of "comparably minimal" interruptions from Covid-19 and would be refocusing on its key strategies in its digital segment.

"However, there remains margin pressure caused by the US dollar exchange rate and the higher-than-normal freight costs," he said.

HLG's board declared a final, not imputed dividend of 24 cents per share to be paid on December 16 to shareholders.

With the interim dividend of 18 cents per share, which was paid on April 14 this year, the full-year dividend comes to 42 cents per share.

The retailer's shares were up 1 per cent to $5.04 in midday trading on the NZX.

- BusinessDesk