International Housewares has reported seven per cent same stores sales growth in its core Hong Kong market in the six months to October.
Macau revenue rose 16.6 per cent to $18.7 million, with same store sales up 2.5 per cent.
But despite a healthy 6.6 per cent increase in total group sales to $960.4 million, the listed retailer reported a 52.9 per cent fall in profit attributable to shareholder, to just $21.1 million (down from $44.8 million during the same period last year) – a decline flagged in a profit warning in early December.
It said the decrease was mainly the result of increasing operating costs across the group, weak consumer sentiment in Singapore and Malaysia and an exchange loss arising from the depreciation of the Renminbi fixed deposit. Without that exchange rate loss, the profit would have been $24 million, a decrease of 46.2 per cent.
International Housewares, which trades under the retail banners Japan Home Centre (JHC), City Life and Epo Gifts and Stationery, ended October with 368 stores worldwide in Hong Kong, Singapore, Malaysia, Mainland China, Macau, Cambodia, Indonesia, Saudi Arabia and New Zealand.
Revenue growth was achieved in both the number of transactions and the average spending per transaction.
“In addition, we continued to increase variety of our product offerings to capture additional market opportunities and expand our customer base,” the company said in its stock exchange filing.
“During the period, the discount driven marketplace necessitated more promotions and markdowns, and this placed considerable pressure on our gross profit margin. Fortunately, the continued steps to streamline the logistics arrangement with suppliers as well as bargaining more favorable pricing that reduced the procurement cost allowed the group to offset much of this pressure. As a result, the group was able to maintain a relatively stable gross profit margin.”
Operating expenses increased from 42.5 per cent to 44.9 per cent as a percentage of revenue against the same period last year, largely due to increased rent and staff costs.
“In spite of these adverse dynamics, with our strong brand recognition and popular product offering, the group has been able to deliver record-high sales with costs and expenses maintained at a manageable level as a percentage of revenue during the period.”
DEspite the challenging Hong Kong market, the company says it remains positive about mid- to long- term business prospects and plans to open more stores in Hong Kong, Singapore and Macau.
But it will continue to restructure its store portfolio in Mainland China, Malaysia and Singapore to mitigate the impact of increased costs in those markets, and currency fluctuations.
“We believe that our comparable store sales growth in Hong Kong as well as the increasing revenue from our operations in Singapore and Macau demonstrate our growth potential in these regions.”