Shares surge as Specialty Fashion trebles profit

Clothing retailer Specialty Fashion has surged 40 per cent after saying its first-half profit will treble.

The retailer - which owns women's fashion stores Katies, Millers, Crossroads, Autograph and City Chic - says its revenue for the half-year ending December 31 was 1.3 per cent up on the previous corresponding period.

The company says it has leveraged this small improvement in sales to a much larger rise in profit, with first-half pre-tax earnings expected to be between $37-38 million, compared to $21.9 million the year before.

Speciality Fashion's net profit after tax is expected to grow even more, almost trebling from $6.2 million to $17-18 million.

The company's chief executive Gary Perlstein says the surge in profit was largely driven by a focus on cutting costs.

"Our continued focus on our strategies to improve sales, margins and costs of doing business has meant we have delivered a significant turnaround in trading performance, almost tripling our net profit for the first half of financial year 2013, when compared with the same period in financial year 2012," he noted in the report.

"The economic uncertainties and structural changes affecting retail have not gone away, but we have pulled all the levers within our control to achieve sustainable improvements, and our results reflect this." The retailer says it has recorded the highest gross margin in its history at 62.4 per cent, due to higher selling prices, reduced product cost prices and lower freight costs.

The company says the higher Australian dollar and reduced cotton prices also helped lower its costs and boost profit margin.

Specialty Fashion says it also made rental savings by reducing the base rents of leases renewed during the period and exiting leases of underperforming stores.

The firm says it made $11.3 million, or 3.6 per cent, of its sales online in the period.

The company's shares were up 41.4 per cent to 99 cents by 10:42am (AEDT) as investors digested the result.

Other fashion retailers such as Premier Investments, David Jones and Myer have also been trading between 0.5-2 per cent higher this morning.

Specialty Fashion will confirm its audited results when it releases its final half-year profit statement on February 18.

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