UPDATE: Hallenstein shares tumble on lower profit, dividend

UPDATE: Hallenstein shares tumble as retailer confirms profit impact from weak dollar

(Adds share price reaction, broker comment.)

By Tina Morrison

Feb. 5 (BusinessDesk) - Hallenstein Glasson Holdings shares dropped after the clothing retailer said first-half profit fell about 20 percent, and it will trim its interim dividend, because a weaker New Zealand dollar and competition crimped margins.

Profit was probably between $6.6 million and $6.9 million in the six months ended Feb. 1, down from $8.6 million a year earlier, the Auckland-based retailer said in a one-page statement. Sales edged up 1.3 percent to $112.4 million, and increased 2 percent in the key trading month of December, it said. The gross margin for the period is almost 4 percentage points below the same period last year, it said.

In early trading its shares touched $2.85, the lowest level since September 2014, making it the worst performing stock on the S&P NZX All Capital Index today. It was recently down 9.9 percent at $2.90.

A weaker kiwi dollar means the company has to pay more for clothing imported from manufacturing countries such as China. The kiwi dollar has fallen about 11 percent against the greenback, the transacting currency for many offshore purchases, in the 12 months ended Feb. 1. Retailers such as Hallenstein are also facing increased rivalry as consumers buy more over the internet from companies with lower margins.

"Sales were not too bad but the margin equation is not good and I would imagine that the weakness in the New Zealand dollar has a fair amount to do with that," said Grant Williamson, a director at Hamilton Hindin Greene. "While exporters are doing very well on the back of the weak New Zealand dollar, importers like Hallenstein suffer quite a bit. The market hasn't taken kindly to that announcement."

Still, Williamson said Hallenstein had faced hits to its earnings in the past and recovered.

"They are pretty smart managers, they have been in the apparel game for quite some time so they normally manage to turn around that performance and then we see the share price improve, so I think some investors will be looking to pick up some bargain basement prices on Hallenstein," he said.

Hallenstein also reduced its first-half dividend to 13.5 cents per share, from 14.5 cents last year.

The retailer, which operates the menswear chain Hallensteins and the women's fashion brand Glassons, will publish its full earnings on March 23.

(BusinessDesk)

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