Premier Investments says trading conditions are getting even tougher for retailers but the fashion brands owner still expects to improve its performance.
Premier, which owns Just Jeans, Portmans, and dotti, booked a 49 per cent fall in full year net profit to $40.5 million.
Net profit slumped as retailers struggled and the company incurred $11 million in one-off costs associated with a strategic review of its retail brands.
Premier said the very challenging retail environment and low levels of consumer confidence meant clothing and apparel sales were weak and the industry was forced to discount extensively.
Natural disasters in Queensland, Victoria and New Zealand had also made things difficult.
Premier Retail chief executive Mark McInnes said trading in the first six weeks of the new fiscal year, starting on July 31, had been very challenging as the economic environment and consumer confidence continued to deteriorate.
“People have actually got the money, employment is good, the savings rate is high, but there’s a fear and lack of confidence out there, and for discretionary retailers that is a real issue,” Mr Innes said on Monday.
Mr McInnes said the deterioration in August and early September was quick and surprising, and was because of the continuing European debt crisis and the decline in share markets.
There was also a lack of confidence in the current federal government arising from a carbon tax that no one could understand and a lack of clarity over “ridiculous” GST thresholds.
“A loss of international confidence and a loss of confidence in your own government means you save,” Mr McInnes said.
But he said Premier, which also owns Jay Jays, Jacqui E, Peter Alexander and the Smiggle stationery brand, was seeking to reinvigorate its product and brands and improve gross margins through better sourcing.
Premier would reduce the number of factories from which it sourced goods, transfer business to factories that made goods for lower prices and shift some sourcing from China to Bangladesh.
Mr McInnes said the Peter Alexander sleepwear stores and Smiggle stationery stores were performing well and that more stores under those brands were set to open.
Smiggle was performing very well in regional areas in Australia and also in Singapore, which had given the company great confidence about expanding the brand in Asia.
Premier chairman Solomon Lew said that despite the tough retail environment, the Premier board believed operations could improve.
Premier reaffirmed guidance that its retail division was expected to generate earnings before interest and tax (EBIT) in 2012 of $80 million to $95 million, given the successful implementation to date of strategic initiatives.
The retail division’s EBIT was $65.3 million in fiscal 2011.
Outside the Premier retail division, Premier said its investment earnings had improved strongly, with higher interest on its cash reserves and improved dividends from its investment in Breville Group.
Premier declared a final dividend of 18 cents, fully franked, in line with the dividend in the prior corresponding period.
Shares in Premier gained eight cents, or 1.5 per cent, to $5.43, as the broader market fell.
