Specialty Fashion Group got publicity yesterday for its weak Christmas performance as sales, revenue and earnings fell for a second December half year period in a row.

Specialty was a clear loser from the slump in sales of clothing shown in recent figures for retail sales from the Australian Bureau of Statistics.

But while acknowledging that impact, it would also pay to remember that its not all bad news in this segment.

For example smaller rival, Noni B revealed in a trading update that sales had recovered, as did earnings, in the December half year.

That was after they took a pounding in the previous corresponding period to December, 2010.

But for Specialty, a much larger business and operates chains such as La Senza, Millers and Katies, yesterday's update was weak, and the market reacted according, sending the shares down 4c or nearly 10% to 43c.

It said comparable store sales in the six months to December 31 were down 4.5% from the previous year, while revenue of $307 million over the same period was down 0.5%.

Issuing its first earnings guidance this financial year, the company yesterday said pre-tax earnings would be $21 million to $22 million for the six months to December 31, which is a sharp, 33% drop on the 2010 figure.

"Given that this is the toughest retail environment we have seen, Specialty Fashion Group has performed well," chief executive Gary Perlstein said in yesterday's statement.

"In spite of recent reductions in the cash rate, industry-wide discounting has continued, but our investments over the past three years meant we protected gross margins."

A year ago the company reported that comparable store sales fell 3.8% in the six months to December, 2010, so the Christmas period hasn't been good for the company in the last couple of years.

Pre-tax earnings for the first half of 2010-11 were $34.1 million, so this year's range of $21 to $22 million is a large fall, and less than half the $46 million earned in the first half of the 2009=10 financial year (which was boosted by the government's spending programs and so-called cash splash, which boosted same store or comparable store sales by 8.9%).

Sales for the first half of 2010-11 were $313 million, down 1.6% from 2009-10.

It's clear the company has given up margin to an extent to protect sales: after tax earnings in the latest half could come in around $12 million, against the $16.8 million earned in the first half of the previous year.

The company also warned that if current trading conditions continued, it would close 120 of its 900 stores over the next three years.

The closures would go hand-in-hand with a strategy to reduce its cost of doing business as the company expands its online sales.

We will know more when the full half year results are released around February 22.

The contrast though with smaller Non B is stunning.

A year ago Noni B was struggling to falling sales, too much stock and underperforming stores.

It management to steady the business in the second half of 2010-11 and seems to have reaped the benefits in the December half year, judging by last week's update.

Noni B says it expects to lift first-half profit by around 60%, despite what it acknowledges as tough trading conditions in the women's fashionwear sector.

The company on Thursday said net profit could rise to between $2.1 million and $2.4 million for the December half, up from the $1.5 million earned in the first half of the previous financial year

Joint managing director David Kindl said in a statement that while sales were in line with 2011, earnings had improved thanks to improved productivity, lower costs and better profit margins.

"We have reviewed all expenses and streamlined operations so we have a leaner structure where executives are closer to the shop floor and able to provide better support to the sales team," he said.

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

Mr Kindl said the chain's new Noni B and Liz Jordan clothing ranges for women had been well-received by customers.

The company is due to report its first-half results for 2011-12 on February 15.

The shares jumped after the report was released and they closed yesterday steady at 54c.

That's 14c or 35% above where they were last Wednesday, the day before the update was released.

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