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Hallenstein forecasts up to 12 percent drop in FY profit after slow start to winter

Thursday 13th June 2013

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Hallenstein Glasson Holdings, the clothing chain, said full-year profit may drop as much as 12 percent after a slow start to winter hurt returns from its Glasson stores in Australia, where rivals have cut prices aggressively.

Profit may be $18.5 to $19.5 million in the 12 months ending August 1, from $21 million a year earlier, the Auckland-based retailer said in a statement.

The forecast confirms the company's concerns at its first-half results in March, when it said record warm temperatures and intense competition had made it difficult to gain traction on winter clothing sales in the first seven weeks of the new season.

"A late start to winter has meant earnings for the current winter season will not match last year," chief executive Graeme Popplewell said in today's statement. "Whilst menswear business Hallenstein Brothers had continued to benefit from its repositioning in the market and from innovative marketing, Glassons has found itself operating in an environment characterised by aggressive discounting and price based promotion."

Popplewell said this was particularly evident in Australia, where larger rivals "in volume fashion womenswear have commenced winter clearance earlier than usual which is a sign trading isn't up to expectations."

"As a result there is now considerable pressure on margin for the balance of the winter season," he said.

Shares of Hallenstein last traded at $5.35 on the NZX and have gained 35 percent in the past year. The stock is rated 'hold' based on the consensus of five analysts polled by Reuters, with a median price target of $5.40.

The drop in profit compared to 2012 is exaggerated by a one-time insurance gain of $1.9 million in the second half of last year, the company said.

The company's Storm chain has continued to trade to expectations, it said.

"Because we maintain close control over our stock levels we do not expect to close the season with excess stocks, and the balance sheet will retain its strong position," Popplewell said. "On that basis the total dividend stream for the year can remain unchanged although that will need to be subject to close scrutiny if earnings continue to deteriorate."

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