Clothing chain wary of margin squeeze

AUCKLAND: Hallenstein Glasson Holdings is wary of a margin squeeze in the second half of the year in what it describes as tough trading conditions in New Zealand and Australia.

The clothing chain will not be providing earnings guidance until after the allimportant summer sales period but did offer a note of caution to shareholders at yesterday’s annual meeting in Christchurch. The shares fell to a 10month low of $4.20, down 3.5%, or 15 cents. The stock has slumped 25% since the end of November.

‘‘The outlook for the second half of the year remains uncertain as increasing costs — such as fuel, freight, electricity etc — and the lower New Zealand and Australian dollar put pressure on our trading margins,’’ chairman Warren Bell said in notes for the meeting.

‘‘We will, however, remain focused on improving our market share and customer experience in the New Zealand and Australia fashion apparel markets in which we operate, and keep a tight control over our operating costs,’’ he said.

In September, Hallenstein Glasson reported a 58% increase in annual profit, having shed the unprofitable Storm retail chain and imposed stricter cost controls. However, sales growth has slowed in the second quarter.

Paymark figures this week showed a slow start to Christmas spending, despite cheaper petrol prices freeing up cash for spending elsewhere. Government data this week showed credit and debit card spending on apparel rose a seasonally adjusted 0.9% in November.

As a proportion of core retail spending, apparel accounted for 6.6% in November compared with 7% a year earlier and 7.1% in November 2016.

Hallenstein Glasson chief executive Mark Goddard said Australasian consumers were facing greater pressures on their discretionary spending, while businesses were dealing with legislative changes, challenging exchange rates and higher costs.

‘‘As a group, we remain focused on those things that are within our control. Our inventory levels are well controlled,’’ Mr Goddard said.

The company managed to widen gross margins to 68.4% in the 2018 financial year from 58.9% in 2017, despite a 12% increase in employee costs to $51.6 million. — BusinessDesk