Withering profit margins have seen clothing retailer Hallenstein Glasson book an 11% plunge in after-tax profit, despite a 2% boost to total sales to $220 million.
As the listed companies' reporting season draws to an end, retailers, such as Kathmandu and Hallenstein Glasson are revealing a fine balancing act between maintaining or boosting revenues and the effects of discounting and subsequent erosion in profit margins.
Children's clothing retailer Pumpkin Patch is due to report today. A late start to a relatively mild winter appears to have caught out many clothing retailers.
Hallenstein Glasson sales were up 2% to $220 million while profit before tax slid from $29.3 million to $25.9 million and profit after tax fell 11% to $18.7 million.
Despite the earnings decline, Hallenstein Glasson will pay a final dividend of 17.5c per share, boosting the full year dividend to 33.5c per share, slightly less than a year ago. Its shares were down almost 2% at $4.25 following the announcement.
Forsyth Barr broker Suzanne Kinnaird said it was a ''disappointing result'' against the same period last year, which was driven by ''very weak'' trading in womens-wear during the second half of 2013.
''Earnings before interest and tax [ebit] at Glasson New Zealand in the second half of 2013 was down 43% on a year ago, Storm was down 14% and Glasson [Australia] reported negative ebit of $800,000, compared to ebit of $800,000 a year ago,'' she said.
Hallenstein Glasson's chief executive Graeme Popplewell painted a sobering picture for the start of the present financial year, saying the first seven weeks' trading had been difficult, with group sales down on last year by 9%.
''While this period does not have a significant impact on earnings for the future period, it does demonstrate how competitive the environment is at present,'' he said in a statement.
Craigs Investment Partners broker Peter McIntyre said the likelihood of a 10% profit decline had been signalled in June by the company, but the warmer winter and mounting margin pressures had pushed the forecast out further.
While Hallenstein Glasson remained debt free, and having closed three outlets, Mr McIntyre said it was ''significant'' the cash position had declined from $25.9 million a year ago to about $19 million.
Mr Popplewell said both Hallensteins and Storm brands performed to expectations, but Glasson in both New Zealand and Australia felt ''the full brunt of a record mild winter'' and aggressive discounting in the women's wear marketplace during the past six months.
Ms Kinnaird said the profit, down 11% on last year, was due to difficult trading conditions, margin pressure at Glasson and a late start to winter.
''The repositioning of the Hallensteins brand continues to show positive results,'' Ms Kinnaird said; noting the company's net cash balance of $19 million and being debt free.
