Clothing retailer Postie Plus Group says it expects to make a $2.56 million net loss for the six months to February, and the retailer now expects to report a ''substantial'' loss for the full year.

First-half sales were 1.5 per cent lower at $43.29m, compared to $43.93m, and the overall group gross margin decreased for the period, which will cause the group to breach its banking covenants.

The company cited a slower-than-expected recovery from difficulties with the commissioning of its new distribution service.

Chairman Richard Punter said in a statement to the NZX this morning that the company was in talks with its bank.

Expenses continue to be managed well with overall expenses in line with last year.

The preliminary first-half result will be released on March 28.

Postie was working ''intensively'' with its distribution service provider to accelerate distribution performance and had enlisted independent expertise to help in the process.

The stock last traded at 24 cents a share.

- © Fairfax NZ News

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