Thursday 25th September 2014
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Hallenstein Glasson Holdings, which posted a 24 percent 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.
Net profit fell to $14.3 million, or 23.94 cents a share, in the year ended Aug.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 percent 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 percent drop in first half profit. Still, the start of the new financial year has been "encouraging" with group sales up 4 percent 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.
"We have taken appropriate steps to ensure there is no re-occurrence 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 the focus is on the crucial trading months of December and January, he said. Further guidance will be given at the annual meeting in December, he said.
Hallenstein is expected to increase 2015 annual profit 9.1 percent to $15.6 million, according to the mean estimate of analysts surveyed by Reuters. That would end two years of annual profit decline. Sales are expected to rise 3.6 percent to $215.4 million, according to the Reuters data.
The company will pay a final 2014 dividend of 16.5 cents on Dec. 5, taking the annual dividend to 28.5 cents, lagging 2013's 33.5 cent payment.
"The strength of the balance sheet together with current trading patterns allows us to comfortably accommodate this payout," the company said.
Shares in Hallenstein touched a seven-week high of $3.10 and were recently trading up 8.5 percent at $3.08.. The stock has declined 27 percent so far this year.
"Investors will be extremely pleased that the dividend is still at such a high level," said Grant Williamson, a director at Hamilton Hindin Greene. "The company is starting to see signs of improvement. The comments that the company has made will give investors confidence."
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 percent to $7.1 million as sales fell 5.2 percent to $83.6 million. The company said most of the decline was in the first half, when profit fell 34 percent, while second-half profit gained 9 percent.
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 percent to $35.6 million. In Australia dollar terms the sales decline was 1.7 percent as a higher New Zealand dollar crimped returns.
The company plans to invest in a new Glassons brand campaign later this year, it said.
Annual profit at the Hallensteins menswear chain slipped 19 percent to $7.4 million as sales declined 1.8 percent to $80.1 million as a warmer than expected winter dented sales of seasonal clothing. In the second half, sales increased 2 percent and profit fell 8 percent.
The company's new large format store for Hallensteins and Glassons in Lambton Quay, Wellington, which opened in October 2013 was very successful and as a result the company plans to continue to invest in larger format stores, it said. Ahead of Christmas this year, Hallensteins in Dunedin and in Auckland's Queen St will move to newer larger premises while Glassons will also upgrade its Queen St store.
Two new format stores will also open in Sydney before Christmas, it said.
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 percent to $8.6 million.
"Considerable focus has gone into reversing this trend and we are now seeing sales return to historic levels," Popplewell said.
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