Fast fashion retailer Bossini has warned shareholders its profit for the six months to December 31 will be down by between 80 and 90 per cent.
Based on the comparable trading period to December 31, 2014, when Bossini reported a profit of HK$665 million, that suggests a profit in the range of $66.5 million to $133 million.
In a profit warning issued to the Hong Kong stock exchange, the company says the profit plunge “was mainly caused by the significant decrease in revenue and gross profit attributable to (i) less visitors and strong Hong Kong dollar which led to less consumption from them in Hong Kong and Macau, and (ii) weak local consumer sentiment, unseasonal warm winter weather and intensified competition in several core markets where the group operates”.
“As the company is still in the course of preparing and finalising its interim results for the six months… the information… is only based on a preliminary assessment… on the information currently available.”
The full financial details, including the final Bossini profit, will be revealed in late February.
While Bossini is not the first Hong Kong based retailer to warn of or report profit declines, most of the others are operating in the luxury end of the market, where sales of watches, jewellery and luxury fashion goods and apparel are down by up to 20 per cent year on year.
But Bossini has no exposure to that market – its business is based on selling t-shirts and casual clothing at low price points.
Data from GfK shows the number of Mainland Chinese visitors to Hong Kong in 2015 – up until November, at least – rose by 37 per cent. As previosuly reported by Inside Retail Asia, the issue for Hong Kong retailers is not that there are fewer tourists visiting the city – but there are fewer wealthy tourists visiting the city. So Bossini, and other retailers targeting the lower end of the market, are not managing to capture the imagination of the more profilgate shoppers now coming to the territory.
Even more puzzling is that Bossini has been one of the few retail brands to stand out over the last 12 to 18 months as bucking the broader retail trend.
In September, the company revealed its results for the year to June 30, reporting a mere one per cent decline in sales to HK$2.523 billion, and a three per cent decline in gross profit to HK$1.264 billion with gross margin down one per cent to 50 per cent. Profit attributable to shareholders fell nine per cent.
“During the fiscal year 2014/15, despite facing challenging retail conditions in Hong Kong and Macau, its segmental business, which includes the export franchising operations, registered record-high sales with flat same-store sales growth for the directly managed stores,” the company said at the time.
“The operations in mainland China, Taiwan and Singapore all experienced improvements in segment results, resulting from the continuously improving shop productivity and stringent cost control measures. Mainland China segment achieved six per cent same-store sales growth and also recorded nine consecutive quarters of positive same-store gross profit growth. Taiwan segment saw a same-store sales growth of seven per cent, representing seven consecutive quarters of positive same-store sales growth.”
In the half year to December 31, 2014, Bossini reported a revenue increase of four per cent year-on-year to HK$1,319 million (then US$170,056,190) and gross profit for the period under review was HK$665 million (then US$85,737,200).