Specialty Fashion Group Ltd. (SFH), Australia’s second-largest listed clothing retailer by store numbers, climbed the most on record after the company forecast first-half earnings would be the highest in three years.
The stock jumped as much as 47 percent to A$1.03 in Sydney, the highest since May 2011 and the biggest gain since its 1998 stock market listing, with trading volume that was 27 times the three-month full-day average. Net income will be A$17 million ($17.8 million) to A$18 million in the first half, compared with A$6.2 million in the year-earlier period, the Sydney-based company said in a statement.
The Reserve Bank of Australia has cut interest rates six times since November 2011 to fuel stronger growth outside of a resource-investment boom. Relatively strong profit margins should help local clothing retailers over the coming year if sales volumes pick up, Macquarie Group Ltd. analysts wrote in a research note Jan. 23.
“We have pulled all the levers within our control to achieve sustainable improvements,” Gary Perlstein, chief executive officer of Specialty Fashion, said in the statement. “Our results reflect this.”
Lower freight costs and cheaper cotton prices, together with higher sale prices and other supply-chain improvements, helped lift gross margins to a record 62 percent during the first half, Specialty Fashion said. The measure shows the profit the company makes on goods sales over what they paid for the items, and excludes staff, rental and interest costs.
First-half earnings before interest, tax, depreciation and amortization will be A$37 million to A$38 million, the company said, the best since the half year through December 2009.
“This is a really significant turnaround in the trading performance,” Perlstein said in an interview. Still, the broader retail environment remains weak, he said. “We’re certainly not getting carried away; we still see very challenging times ahead. The consumer has not learned to be immune to world events.”
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