Retail’s long road back

What a difference six months can make.

In August, women’s fashion retailer Noni B reported a net profit for the 2010-11 of just $231,000, down a whopping 94%.

It had been forced to close seven non-performing stores (although it did open eight new ones) and joint managing director David Kindl announced the company would finally start selling online.

“There’s a lot of heavy, extreme discounting in the Australian fashion industry at the moment,” he said at the time. “And that has an impact on all of us and had an impact on this result.”

Fast forward to January 2012. As retailers such as JB Hi-Fi, Harvey Norman and Kathmandu produce profit downgrades and warn on weak Christmas sales, Noni B pulls a huge surprise by releasing a profit upgrade.

Profit in the six months to December 2011 is expected to be $2.1-2.4 million, compared with $1.5 million in the previous corresponding period.

That sort of rise would be brilliant in any type of market, but in this environment it’s frankly amazing.

Little wonder then that investors boosted Noni B’s share price by 35% yesterday in celebration.

But let’s not get carried away. The big jump in the stock helped lift the company’s share price to 55c – higher than the 49.5c the shares closed at after the terrible result in August, but only just.

One profit upgrade does not a retail recovery make.

Still, it is interesting to see what is behind the turnaround.

In a short statement to the ASX, Kindl pointed to some good old-fashioned cost cutting, designed to make the group’s operations leaner and more efficient.

He also said the company’s executives were now “closer to the shop floor and able to provide better support to the sales team”.

“‘We continued to invest in our sales team and increased training to improve service for our customers, including offering personal styling sessions.”

Those are two really interesting statements and suggest that Noni B has pursued a back-to-basics strategy – cut costs, improve the retail offering, focus the entire business on the shop floor.

The company’s “webshop” is still in its infancy, but Kindl says its new clothing collections have received a good online response.

It will be fascinating to see whether other clothing retailers have had the sort of success Noni B appears to have enjoyed in the last six months.

If other retailers haven’t, you can bet they’ll be doing a few store visits in the coming weeks.