Hi Peter,
I tested the image from your attachment and it works fine on my end with HikaShop.
This means the issue is likely specific to your server configuration. Please check the following:
1. Check your PHP memory limit in System > System Information > PHP Information. Search for "memory_limit". If it's 128MB or less, try increasing it to 256M.
2. Check that the GD library is enabled in PHP (also visible in PHP Information, search for "gd").
3. Check if your original image file is the same as the one you attached here, or if it's a larger version. If the original is a high-resolution photo from a camera, try resizing it to 1200x1200 pixels before uploading.
4. Check the file permissions on your HikaShop upload folder (media/com_hikashop/upload/). It should be writable by the web server.
If the problem persists, please enable the Joomla error reporting (System > Configuration > Server > Error Reporting > Maximum) and try uploading again. The error message should help identify the exact cause.