National clothing chain Hallenstein Glasson Holdings is feeling the pinch of fierce competition in women's fashion clothing, with lower sales in its first quarter than the previous year.
Sales for the period from August to December 8 were down 7 per cent on last year, with the company blaming a warm winter and intense competition, especially in women's wear.
Though Hallenstein Glassons' online sales were expanding, chief executive Graeme Popplewell said e-commerce was "a double-edged sword".
At the annual meeting in Christchurch yesterday, Popplewell said the company had grown web sales over the past 2 years from a very small number to almost 5 per cent of its turnover.
Just how much of that business had been gained at the expense of the company's stores was difficult to accurately measure, he said. But "it would be naive to suggest there is no impact".
The failure of the tax system in both New Zealand and Australia to collect GST from sales made by international websites to local customers put the company at a clear disadvantage, he said.
"I don't want this to sound like sour grapes, but we are competing with an e-commerce world where profit margins are low or non-existent, and competition for market share is the name of the game."
Popplewell told shareholders the company was working on regaining lost ground.
The focus on e-commerce did not mean bricks and mortar stores had become irrelevant, he said. "It used to be that a suburban shopping mall provided an experience and convenience for shoppers . . . Now, however, the same convenience can be found on your phone, iPad, or computer 24 hours a day, 7 days a week."
Offering an enhanced retail experience was necessary to attract customers to the shops.
As part of this strategy, Hallenstein opened its biggest store yet, in Lambton Quay, Wellington. A 700m 2 ground floor space houses Glassons, and Hallensteins is on the first floor with 600m 2 space.
"These stores are world class and give us the opportunity to really make our brands shine."
Popplewell said the first results for this super store had been impressive, with sales far outstripping initial projections.
The company warned investors in November that it expected its first-half net profit to fall by 20 per cent compared with last year. It expected to post a half-year profit of $8 million for the six months ending February 1, a decrease from last year's $10.4m.
Chairman Warren Bell remained positive.
A further update would be provided in January, following results for Christmas and post-Christmas sales.
The company paid a final dividend this month of 17.5 cents a share and with the interim dividend of 16 cents in April, the total was 33.5 cents a share, unchanged from last year.
An annual net profit of $18.7m was down 11.2 per cent for the year to August 1.
The stock last traded at at $3.70 - 28 per cent down on the year before.