Footwear retailer S Culture says it expects to post a net loss in the six months to June 30, compared with a profit in the same period last year.
In a warning to shareholders lodged with the Hong Kong Stock Exchange on the eve of Wednesday’s public holiday, S Culture said trading results for the five months to the end of May suggested the company would finish the half year in the red.
S Culture sells a range of international footwear brands including Clarks, Josef Seibel, The Flexx and Yokono. It has a network of 128 stores across Hong Kong, Macau and Taiwan trading as S.Culture, Shoe Mart and Scoops and under individual brands, such as Clarks, Clarks Originals and Josef Seibel.
In its stock exchange filing, S Culture said the projected loss was “mainly attributable to the prolongation of the sluggish consumer market in Hong Kong, arising from the negative consumption sentiments of the general consumers and tourists under the persistent uncomfortable shopping atmosphere”.
“These trigger the consequence of weak foot traffic and declining number of target Mainland customers visiting Hong Kong. In this regard, our retail segment in Hong Kong was affected and thus the group as a whole had recorded a same store sales decline of approximately 7.6 per cent for the five months ended May 31 2015.”
Since June 30 last year the company has opened 13 new stores, but it says some of these have yet to break-even “because of the negative enduring effect of the unfavorable atmosphere of the retail market since the second half of 2014”.
“In light of the weak retail market and margin erosions in the Hong Kong footwear market, the group will assess and rationalise its retail network in Hong Kong while pacing and strengthening our business presence in the Mainland China to tap the market potential there.
“The group is mindful of the escalating cost of operations, including but not limited to the rental costs, concession fees and salaries and allowance. The group will continue to monitor the impact of the above-mentioned factors and pursue the appropriate stringent cost containment measures, including but not limited to stalling the salary increment in 2015 and closing low performing retail outlets to improve store efficiency.