Giordano Hong Kong sales increased by four per cent in the last quarter, with same store sales up a staggering 12 per cent in a stagnant retail market.
The company says with the decline in Mainland China visitors to Hong Kong and Macau, the company has repositioned its product range to focus on more basic essential products. “This resulted in strong volume growth compared to the same period last year.”
Total sales for the quarter to September 30 were HK$1.240 billion, three per cent lower than the same period last year. On a constant currency basis, sales increased by two per cent.
Despite encouraging results in its home market, Giordano reported the depreciation of local currencies against the US dollar in Southeast Asia, Taiwan and Australia is depressing reported sales growth at the group level, and pushing costs up in those markets.
In the first half of 2015, the company completed the acquisition of its franchisees’ operations in Kuwait and Qatar. Excluding these transactions, sales would have decreased by four per cent and on a constant currency basis, sales would have increased by one per cent
Brand sales for the quarter were flat compared to the same period last year. Comparable store sales for the quarter increased by four per cent, mainly due to improving performance in Mainland China, Hong Kong and Singapore.
The total number of stores in the group declined by 19 to 2359 primarily due to the closure of unprofitable stores in Mainland China.
Gross margin for the quarter grew by 0.1 percentage point to 58 per cent, despite higher purchase costs due to weak overseas currencies, which reduced gross margin by 1.4 percentage points.
Gross profit for the quarter was HK$719 million, a decline of three per cent over the same period last year.
Sales in Southeast Asia declined by seven per cent, reflecting the impact of weak local currencies which on average depreciated by 16 per cent against the Hong Kong dollar in the last 12 months. However, on a constant currency basis, sales grew by nine per cent. Comparative store sales grew by eight per cent in the quarter with strong recovery from last year in Singapore and Thailand in particular.
Sales in the Middle East have climbed by 11 per cent with strong growth in the UAE.
Giordano’s new budget brand “Beau Monde” is still under development.
“At the end of the period we had 14 shops and we expect to increase this to 25 shops by the end of the year. As we improve the merchandise for this new brand, we expect to reach break even profitability in the fourth quarter of 2015 or the first quarter of 2016. This will enable us to develop this brand faster in 2016,” the company said in its stock exchange filing.
“As we reposition our brands through the exit of non-performing shops and poor quality locations, we are also investing in store upgrades, and by December we expect to have upgraded two thirds of our store portfolio in the past two years. During the third quarter, we upgraded/opened 39 self-managed stores and 51 of our franchisees’ stores. By the end of 2015, we expect to have upgraded/opened 200 shops in the year. This compares with 397 shops renovated in 2014.”