Fashion and accessories company ENM Holdings has slid into the red due to falling sales in  Hong Kong and Mainland China.
For the year ended December 31, the group recorded a net loss attributable to shareholders of HK$106.896 million (US$13.7 million) compared with a net profit of $29 million the previous year.
Consolidated turnover of $215.5 million for the year was down 22 per cent on the previous year’s $275.385 million. Gross profit fell 20 per cent to $117.607 million from $146.559 million.
Closing poorly performing shops in both China and Hong Kong resulted in depreciation and amortisation expenses of 44 per cent.
Overall turnover for the year for the group’s Swank Hong Kong store fell 21 per cent to $1711 million, while gross profit was down 19 per cent to $90.531 million. The company attributes the decline to the uncertain and tough macro-environment, an inactive local economy, the ongoing decline in spending by inbound tourists from Mainland China and significantly lower retail spending on luxury goods.
In November, the group’s Paule Ka shop at Pacific Place had its lease terminated because of the mall revamping its tenant mix. Its Just Cavalli shop at Festival Walk was also closed in May.
Faced with diminishing gross profit, the group took steps to reduce labour and operational costs. Strategic action was taken to scale-down the portfolio of brands, while effort was focused on developing new brands with more potential.
Three Swank shops with unsatisfactory results were closed in China during the year, namely the Xian shop, Hangzhou shop and Beijing outlet. There are plans to close the last one in Beijing Jinbao Place soon.
Also closed were Cesare di Pino shops in Hangzhou, Beijing Lafayette department store and Beijing Jinbao Place, and the group aims to close the final Beijing shop soon.
The group’s 49 per cent joint venture with Brunello Cucinelli also had a setback, but not as severe as many other International fashion brands. The group’s share of losses was $1.076 million, compared to a profit of $525,000 in 2014.
Looking ahead, the outlook for Swank Hong Kong for the first half of this year appears to be more challenging, says the group, citing “intimidating” macro and micro issues, in particular Hong Kong’s political landscape and stock market fluctuation.
In greater China, new strategies will be formulated to capture and strengthen customer loyalty, which may include enhanced marketing communications via digital format/media plus a higher level of unique shopping experiences and VIP customer services.
Meanwhile, the company plans significant changes for its men’s store at Landmark, where the landlord plans major renovations in the second half of this year. Also, the group’s Corneliani mono shop is scheduled to be relocated.
It will be a year of consolidation for the Brunello Cucinelli JV, and with a possible reduction in rental rates at key locations; there is a possibility to increase the number of shops to improve brand awareness and market coverage.
Other expansions and developments are on hold until overall market conditions improve.