Country Road defies gloom with sharp sales rise

COUNTRY ROAD has continued to evade the gloom weighing on Australia's rag trade, reporting group sales for the half year to December jumped more than 50.5 per cent to $331.3 million, but its chief executive, Iain Nairn, has declined to offer guidance for the year ahead.

The company has said it expects to report next month that earnings have doubled to as much as $29 million for the period which includes the contribution of its recent acquisition, Witchery Group, as of September 30 last year.

The Witchery acquisition aside, Mr Nairn said the strong underlying performance for the first 20 weeks of the year continued through to Christmas.

"The trade has just continued to perform well," Mr Nairn said. "So it's been a pretty healthy performance across the group."

Comparable store sales in Australasia increased 10.7 per cent for the half year, down slightly from the 12.2 per cent reported for the 20 weeks to November 10.

The company said it expected profit before tax for the December half would be in the range of $26 million to $29 million, compared to $13.7 million for the corresponding period last year.

This includes earnings contributions from Witchery from September 30 as well as one-off acquisitions costs associated with the $172 million acquisition.

Before the acquisition, Country Road said the combined financials of the two companies, based on their 2011 financial year results, would have shown normalised revenues of $679 million, and normalised earnings before interest, tax, depreciation and amortisation (EBITDA) totalling $73 million.

Cost synergies of $10 million are expected to be realised over four years.

While Country Road is listed on the ASX, almost all of its shares are owned by two investors.

Retail billionaire Solomon Lew's Australian Retail Investments (ARI) owns almost 12 per cent of the company, and South African group Woolworths (unrelated to the Australian Woolworths business) holds just less than 88 per cent.

Last year, Mr Lew threatened legal action over the Witchery deal saying he would be oppressed as a minority shareholder if the takeover went ahead. Country Road asked Mr Lew to pay $11 million to help fund the deal.