Lifestyle International confident despite profit slip

Despite the challenging business environment both in Hong Kong and Mainland China, retailer Lifestyle International says its trading remains on a firm footing.

The Hong Kong-listed retailer says its turnover for last year rose 3.4 per cent to HK$6.1714 billion (US$793.984 million), while profit fell 10.7 per cent to $1.9144 billion.

While sales revenue at its Hong Kong flagship store Sogo Causeway Bay edged down 4.5 per cent, it continues to be the largest contributor to the group’s bottom line.

In China, the group’s Shanghai Jiuguang store had a solid year despite intensifying competition and weak market sentiment. Its sales revenue for the first six months was up 9.7 per cent from the same period in 2014, thanks to an improved brand and product mix, but changes in market conditions in the second half of 2015 weighed on the store’s performance for the year, with sales revenue rising to RMB1.9897 billion ($US304.156 million) from RMB1.9306 billion.

However, the group says this was a satisfactory performance given the generally weak market in Shanghai and when compared to rivals.

During the year, Shanghai Jiuguang kicked off a renovation program, with work is scheduled for completion this year.

Notwithstanding weakening local consumption, the group’s Suzhou Jiuguang store continued to rise in popularity, delivering steady results throughout the year. Its profit margin was resilient despite competition in the department store sector in the city, which is intensifying with the entry of new players.

Suzhou Jiuguang’s sales revenue rose 0.3 per cent for the year to RMB793.3 million, while the average daily traffic footfall increased 4.4 per cent to 22,400 visitors.

In the north-east of China, the Dalian Jiuguang store performed largely in line with the sluggish local market conditions. Sales revenue fell 23.8 per cent from the previous year despite an increase in the average daily traffic footfall.

Shenyang Jiuguang, which opened in October 2013, continued to face challenges with shrinking economic activities and fragile consumer sentiment. Because of the anticipated prolonged economic slowdown in Shenyang, the group closed the store in December. One-off costs relating to the closure amounted to about HK$22 million.

The group’s first standalone Freshmart store in Shanghai reported weakening results for the year, with sales revenue sliding 7.7 per cent. The store opened in July 2013 as a bid to replicate the success and broaden the presence of the brand, which has been popular with customers at Sogo Causeway Bay in Hong Kong as well as Shanghai Jiuguang.

Lifestyle International says the outlook for the retail market in Hong Kong and China remains challenging and difficult, given the lingering global economic uncertainties. The recoveries of developed economies will be slow and patchy, with downward pressures on emerging market economies still prominent, it says.

While economic growth in China has moderated in recent years, the world’s second-largest economy is expected to continue as the key growth driver for the world economy. Ongoing economic reforms and the expanding middle and upper classes in China will drive sustainable growth in retail consumption. 

Lifestyle International says it is well positioned to benefit from the growth opportunities in the retail market in the medium to long term.

A strong US dollar and restrained global growth could continue to discourage consumer spending in Hong Kong, but the group says it will stay prudent and focused on implementing its long-standing and sound business strategies of seeking profitable growth through effective marketing and service excellence.

In mainland China, it will continue to provide quality products to cater for the needs of more sophisticated and quality-conscious customers.

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