UPDATE 1.20pm: Womenswear retailer Specialty Fashion Group says a major reason behind a huge jump in projected first-half profit is that it no longer sells cheap China-made copies of overseas designs.
Shares in Specialty Fashion Group soared nearly 40 per cent after the group said it expects its profit in the first half of the 2012/13 financial year to nearly triple because of cost savings and improved sales.
Shares in Specialty Fashion closed up 27 cents, or 38.57 per cent, at 97 cents.
The owner of the Katies and Millers fashion stores expects its net profit for the six months to December 31 to be in the range of $17 million to $18 million.
The guidance represents a significant increase from the company's $6.2 million profit posted in the corresponding period last year.
It also contrasts with the profit forecast of women's fashion retailer Noni B, which yesterday said it expected its first half net profit to fall to between $1.7 million and $1.9 million, from $2.4 million in the previous corresponding period.
Noni B shares fell 14 per cent yesterday.
Specialty Fashion chief executive Gary Perlstein said the group had experienced a significant turnaround in its trading performance as its strategy to transform its supply chain started to generate benefits.
Gross margins had improved as selling prices increased.
Selling prices had risen as a result of the implementation of design capability within the business.
"We no longer go overseas, buy a garment from a competitor overseas, go via China and knock it off,” Mr Perlstein told AAP.
"We actually design the product ourselves, so we have a point of differentiation in the market.
"That means you're not playing on price all the time."
Although it had still been necessary to engage in discounting, Mr Perlstein said the better product differentiation had allowed the group to realise higher average sell prices.
The group also benefited from steady rents, reduced product cost and freight prices, falling cotton prices which had reduced the cost of fabrics, and the closure of underperforming stores.
Mr Perlstein said SFG's stronger trading performance had resulted in very strong cash levels, which would enable the group to continue its investment in expanding its online sales capability and open new stores.
The group would continue to invest in upgrading its online presence, which was designed to encourage online customers into the physical stores by giving them the choice of picking up products in-store or reserving products that were in-store.
Mr Perlstein said the group's outlook was still “very cautious” given difficult trading conditions in the retail sector.
But the group was encouraged by the fact that it had been able to produce solid results during a difficult time.
Sales in the group's 892 stores in the six months to December rose 2 per cent on the prior corresponding period, and revenue lifted 1.3 per cent to $311.2 million.Specialty Fashion Group is due to release its finalised first-half financial results on February 18.
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