Clothing retailer Hallenstein Glasson FY profit falls 25%
Hallenstein Glasson Holdings Limited announced an audited net profit after tax of $15.868 million for the year to 1 August 2008. This exceeded the market guidance of $15 million issued in July, but was down 25.5% on the previous year (2007: $21.307 million). Group sales were $193.748 million, down 3.2% on the previous year (2007: $200.187 million).
Chairman Warren Bell says the retail environment became increasingly challenging as the 2008 calendar year progressed. “The cumulative impact of increased fuel, food, mortgage and rent costs on our customers, coupled with a global melt down of financial markets, has seen consumer confidence fall to a low not experienced for many years.”
The company's strategy for these times is to strive to maintain market share, reduce costs at every level in the business, and to maintain the strength of its balance sheet.
“Our current stock levels are acceptable, a demonstration of the tight focus the company has always maintained in this regard. Particular focus is now being placed on delivering economies out of our supply chain, and we have highlighted areas for potential improvements to be realised over coming months.”
Mr Bell highlighted the intense cost pressures affecting retail businesses, particularly from rental increases, but indicated Hallenstein Glassons was well placed to take advantage of these.
“The impact of the annual rent increases that are being demanded by the major retail landlords cannot be underestimated. In some situations rents are ratcheting to unsustainable levels. We anticipate there will be fallout in some shopping centres where tenants will find it impossible to continue. This may well open up new previously difficult to secure sites, and we have the financial strength to take advantage of these opportunities.”
In Australia, the company's medium term strategy to develop the Glassons business remains intact, although the commencement of any aggressive store rollout programme has been put on hold until market conditions improve. In the meantime, Glassons is continuing with its plans to establish a Melbourne based buying team, and build an infrastructure with knowledge and experience of that marketplace.
The fledgling Storm women's fashion chain is continuing to fulfil its potential with a further site in Milford, Auckland, opening next month. Further site expansion opportunities may present themselves as commercial rent rises begin to impact.
Trading for the first two months of the current financial year has been mixed, with sales in Australia showing an increase of 5% while New Zealand sales have declined by 11%. Overall group sales for the first two months of the new financial year are down 9% on last year.
Mr Bell says, “The Australian economy appears more resilient than New Zealand, although the prospect of tax cuts, further interest rate cuts, and potential election promises may see the New Zealand retail environment improve in the latter part of this year. It is too early to predict profitability for the current half, although the board considers it unlikely the $9.237 tax paid profit achieved last year will be met.”
The Directors have declared a final dividend of 10 cents per share, making a total dividend of 27 cents per share for the year (35 cents per share last year.) The reduced dividend payment is consistent with the previously stated policy of reviewing dividend on the basis of current performance and anticipated future cash flows. The dividend will be paid on 12th December 2008.
Hallenstein Glasson Holdings Limited