Hallenstein sales growth stalls on GST hike, rising Australian interest rates
By Paul McBeth
Dec. 7 (BusinessDesk) – Hallenstein Glasson Holdings, the clothing retailer, said sales growth stalled in the first four months of the financial year as a hike in local consumption tax and rising Australian interest rates cut demand.
Chairman Warren Bell told shareholders that sales growth of 5% in August and September was followed by weak consumer demand in October and November, leaving four-month sales unchanged from a year earlier. He told shareholders at their annual meeting that tougher competition is putting the company’s margins under pressure.
“The momentum achieved over the past year will be extremely difficult to maintain, and the opportunity to further improve sales and margin on the existing business base is now far more challenging,” Bell said. “At the current point in time out profit is marginally ahead of last year, but as stated, December is the make or break month.”
Retailers have been struggling as households focus on repaying debt in New Zealand’s low interest rate environment. The lack of consumer spending has seen the government’s tax take fall below forecasts and kept the economic recovery on hold, forcing Reserve Bank Governor Alan Bollard to keep rates at stimulatory levels for longer than first anticipated.
Bell said it’s too early for the company to provide a trading update, which it will provide after the Christmas trading session.
The shares were unchanged at $4.20 in trading today, and have gained 27% this year.
Hallenstein Glasson posted a 53% jump in profit to $19.6 million in the year ended Aug. 1, and Bell attributed this to more efficient buying that’s led to less unwanted stock, better profits on offer, and the strong kiwi dollar.
“The strength of the NZ dollar has undoubtedly been an important factor in achieving improved margin,” Bell said.
“However, we cannot overlook the impact of better buying,” especially in its Glassons outlets which have achieved “real gains in margins” from the regime, he said.