Trendy clothing company Gazal Corp Ltd has posted a 6.3 per cent hike in annual profit from the year-ago period on the back of higher sales in a competitive retail environment.

The company, whose brands include Mambo, Raw, Bisley and Kookai, reported a full year net profit for the period ended June 30 of A$9.7 million as sales climbed just under 10 per cent to A$200.9m from 2002.

But it said sales of the Mambo surfwear label had failed to meet expectations as its European debut disappointed amid fierce discounting by rival surf and youth apparel brands.

Gazal said European sales accounted for around nine per cent of group revenue but generated just A$566,000 of gross profit, while domestic sales climbed 5.5 per cent to A$171.5m from 2002.

"This start-up phase proved more difficult than first anticipated," Gazal said in a news release.

"This factor, combined with intense competition in the surf-youth market, materially affected profitability."