Australian clothing retailer Colorado Group Ltd has reported a 13 per cent increase on net profit for the first half, which came in at $A2.5m ($1.23m), exceeding the company's own forecast.

The group, which operates 338 stores in Australia, and trades as Colorado Adventurewear, Mathers Shoes, and Williams the Shoemen, increased sales by 1.8 per cent in the first half year on year. An interim dividend of 2 cents per share was declared.

Colorado managing director Rowan Webb attributed the growth to the company's "ability to maintain and, in some cases, increase margins in what has been a discount driven, low Australian dollar environment. We deliberately avoided the current industry trend of sacrificing margins in pursuit of low profit sales growth."

Mr Webb was bullish on the recent Palmer Corporation acquisition, emphasising that the small trading profit seen during the past five months is a preliminary to the emergence of the business "true trading potential".

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