Chinese menswear manufacturer and retailer Xiniya Fashion has fallen into the red as it runs an unprecedented stock buy back program.
Xiniya, which has 1200 stores throughout China, has reported a pre-tax loss of RMB206.1 million (US$33 million) in the quarter to September 30 – compared to a profit of RMB8.7 million (UDS$1.4 million) in the same period last year. Revenue was down from RMB389.8 million to 205.2 million.
Its retail chain comprised 207 fewer stores year on year after 49 were opened and 256 closed.
Earlier this week rival listed menswear retailer Zuoan Fashion announced a 20 per cent slump in revenue and a net loss of more than US$1 million.
Chairman and CEO Qiming Xu blamed an ongoing downturn in China’s menswear market but said the company was responding to the challenge.
It launched a program to buy back about one third of its inventory in the retail market, which will be exported for sale outside China so as not to affect the local market with a flood of discounted stock.
“In order to ensure that our retail network continues to attract customers and display new and innovative products, our buy back focused on removing the most outdated fashion products. According to our estimates, the inventory bought back during the quarter represents approximately one-third of the inventory currently in our sales channels,” said Xu.
“By working in close cooperation with our distributors and authorised retailers, we plan on selling another one-third through our retail network by offering discounts and promotions over the next year. While we believe that the remaining one-third is more than ample to maintain a healthy and flexible retail network, we may buy back more inventory as the situation evolves over the next year,” he said.
“I am confident that the rapid execution of our inventory buy back during the quarter and the efficient deployment of our cash into specific areas of our business will allow Xiniya to develop in a more healthy, long-term manner. While the implementation of a new compressed business model will take time to bear fruit, I am pleased to see positive initial results as we work diligently towards generating increase value for our shareholders.”
