Following a 33 per cent plunge in net profit for its financial year ending February 29, fashion retailer IT Limited says it will probably continue deep discounting to boost sales.
“We don’t see any indication of a recovery in consumer appetite or improvement in the business environment in the near term,” says head of investor relations and corporate finance Benny Fong.
Listed on the Hong Kong exchange, IT has 668 stores worldwide, most of them in China and Hong Kong. More than half its products are in-house brands with the rest curated, international brands.
Fong says the company has been under pressure, especially since major brands internationally had started discount sales earlier than in previous years, and had also been offering steeper discounts.
IT’s net profits were down about a third to HK$274.8 million (US$35.386 million) for the year, mainly because of retail sales in Hong Kong falling while rents kept rising. There was also a foreign exchange loss of HK$65.1 million after the company converted its yuan fixed deposits into Hong Kong dollars in August, when China devalued its currency by almost 2 per cent – the biggest change in a decade.
Excluding its foreign exchange losses, the company’s net profits dropped by 7.6 per cent to HK$274.8 million. With sales plunging 12.5 per cent, the business had its poorest first-quarter performance since 1999. Retail sales in Hong Kong, which account for 46.3 per cent of its business, slid 3.8 per cent to HK$3.49 billion, largely because of steeper discounts and more frequent promotions.
During the year, the brand shuttered 17 stores and reduced its trading area by 5.2 per cent across Hong Kong.
Looking ahead, Fong says the company remains “prudent” about upcoming strategies in Hong Kong, and may continue to close stores depending on market conditions. However, IT will continue to expand its network gradually in China, where it has a presence in 20 cities. Retail sales on the mainland jumped 16.4 per cent.
IT also has stores in Europe, Canada, Japan, Macau, Taiwan, Singapore, South Korea and the US. It carries apparel from established and up-and-coming international designer brands, in-house brands and licensed brands. International brands include Acne Studios, Alexander McQueen, Balenciaga, Celine, Comme des Garcons, Dior Homme, Kenzo, Lanvin, Maison Margiela, Marni, Mercibeaucoup, Moncler, Saint Laurent and Valentino. It has joint ventures with Camper in China, French Connection in Hong Kong, Macau and China, Galeries Lafayette in China, and Zadig & Voltaire in Hong Kong.