Shares in clothing retailer Specialty Fashion have plummeted as costs soar and profits sink.
The group behind brands such as Katies, Millers and City Chic, suffered a 3.8 per cent drop in net profit to $12.5 million in 2013/14.
While revenue rose by a fifth to $685 million, operating costs skyrocketed by $85.8 million mainly as a result of its purchase of clothing brand Rivers in 2013.
Specialty Fashion has been trying to revamp the Rivers business by installing new executives and getting rid of old stock.
The retailer expects to start seeing improvements in the second half of this financial year, when it introduces new products.
Meanwhile, Specialty Fashion is planning to open more City Chic clothing stores in South Africa and the United States.
Chief executive Gary Perlstein said while the retail environment was tough, the company would continue to invest in expanding its business.
"Our strategy over the past three years has been to invest," Mr Perlstein told AAP.
"It is not a time to crawl into a hole, one actually has to make those investments."
During the year, Specialty's comparative sales, which strips out the effects of store openings and closures, dipped 0.7 per cent.
However sales rose five per cent in the second half, a turnaround from a 4.9 per cent fall in the first six months of the financial year.
The improvement has continued since July.
However investors were not impressed with Specialty's results, pushing its shares down nine cents, or 8.9 per cent, to 92 cents by 1530 AEST.
100 Doors managing director Peter Esho said while net profit came in a little under expectations, the business remains in a strong position as its store base continues to grow.
"The expectation out there in the market is eventually those store benefits will filter through to revenue," Mr Esho said.
"There's only so much cost the business can strip out. At gross margin level they're doing all the right things."
SPECIALTY FASHION NET PROFIT FALLS
* Sales revenue of $685m, up 20.3pct from $569.4m in 2012/13
* Net profit of $12.5m, down 3.8pct from $12.97m
* Fully franked final dividend steady at two cents a share
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