Country Road says worst is over for retailers but online remains a threat Recent campaign imagery from Country Road, which reported a 54.2pc rise in Q1 sales but warned that conditions remained tough. FASHION retailer Country Road has reported continued sales growth from existing stores for the first quarter of the financial year but warned that conditions were likely to remain difficult into 2014 amid poor consumer confidence and the entrance of new players. Speaking after the company's annual general meeting in Melbourne today, Country Road chief executive Iain Nairn said sales had risen by 54.2 per cent to $234.2 million in the 17 weeks to October 27 over the previous comparable period. Total sales for the Australian business were $208.7m, up 60.2 per cent, or 4 per cent when the benefit of last year's $172m acquisition of the Witchery and Mimco brands was excluded - a slowdown from the 12 per cent comparable sales growth seen from existing Australian stores last financial year. However Mr Nairn said he was encouraged by the growth in sales for the year to date, noted that last year's strong sales lift hat set a high hurdle for the new financial year. "We're encouraged, particularly against good figures last year - we're up against our own numbers, so it's pleasing to see that we're continuing the performance," he said. The South African business reported sales of $25.5m for the quarter, up 18.3 per cent, or 11 per cent on a same-store basis. However Mr Nairn said that when the impact of currency shifts was stripped out the company increased comparable sales by 16 per cent. But like other discretionary retailers, Mr Nairn was less than bullish on the prospects for a strong recovery in spending. "We expect the market to remain highly competitive with cautious consumer and business confidence and growth in market share of new entrants to continue into the next financial year," Mr Nairn told the meeting. Speaking to The Australian after the meeting, Mr Nairn said discretionary retail was "still pretty tough," citing IBIS World forecasts for the sector to grow sales by only 1 per cent this financial year. "I think it's hit the bottom of the cycle and is slowly going to begin to grow now, but against that backdrop there's a lot of things happening in the marketplace; the rise of online, more overseas players coming in, and you can see it in our competitors' numbers, some are struggling and some are doing better than others," he said. Country Road has not made any performance forecasts for the current financial year. Mr Nairn, who was chief executive at Witchery prior to the acquisition, when he succeeded former Country Road chief Howard Goldberg, said he expected that interest rates may increase in 2014 but they would be unlikely to present a major headwind. "We think they may rise slightly but we don't think it will have a material impact on our customers," he said. The company still had capacity to add bolt-on acquisitions but was not currently considering any deals, he said. During the meeting, proxies associated with 11.9 per cent shareholder Solomon Lew voted against the re-election of chairman Ian Moir and the adoption of the remuneration report. Both resolutions were passed with the support of 87.9 per cent shareholder Woolworths International, a South African retailer unconnected to Australian retailer Woolworths. Mr Lew, chairman and 41 per cent-shareholder in Just Jeans parent company Premier Investments, has consistently agitated against Country Road's majority owners since 1997, when he refused to sell his shares into their attempted takeover bid. His shareholding is just enough to keep Woolworths International from reaching the 90 per cent threshold required to compulsorily buy out all other shareholders. Last year Mr Lew threatened legal action against Woolworths International over a $92m non-renounceable rights issue undertaken to fund the Witchery deal, alleging it was a ploy to dilute his holding and force him out of the company. The threat was ultimately dropped and Mr Lew took up his full $11m entitlement under the issue. Mr Nairn declined to comment on whether Woolworths SA might ever succeed in buying Mr Lew out of the company. Mr Moir earlier told the meeting that the company was on track to deliver $10m in annual cost savings from the integration of Witchery by 2016, as forecast at the time of the rights issue.