Sales for fashion retailer IT Hong Kong grew by 7.4 per cent to HK$3643.2 million (US$469.7 million) for the six months ended August 31.
However, retail sales in Macau dropped by 9.2 per cent to HK$91.7 million, and in Hong Kong fell by 2 per cent to HK$1540.2 million with total trading area cut back by 2.7 per cent. The comparable store sales growth rate eased by 0.9 per cent – no change from the same period last year.
Total retail sales in China grew 14 per cent to $1523.7 million on the back of double-digit percentage growth in sales and positive comparable store sales growth rate at 4.6 per cent, down from 5.9 per cent for the corresponding period last year.
With more tourists, Japan continued to outperform with total retail sales of $326.7 million, representing 46.9 per cent growth.
The group’s gross profit increased by 9 per cent to $2209.2 million at gross profit margin of 60.6 per cent (59.7 per cent for the same period last year).
The group turned around its net loss of $31 million to record a net profit of $39.1 million, but this includes an exceptional non-recurring foreign exchange loss of $66.8 million as a result of the conversion of the group’s RMB fixed deposits into Hong Kong dollars in August last year. Excluding this, the net profit increased from $35.8 million to $39.1 million, up 9.2 per cent.
Still suppressed
IT says the fashion retail business continued to be suppressed by the same adverse economic factors as in the previous year. In the Hong Kong segment, particularly, local consumption remained soft as a result of the strength of the Hong Kong dollar, which not only encouraged outbound spending but also discouraged inbound tourist traffic growth.
External economic conditions related to cost inflation, such as rental and staff costs, also remained negative, continuing to be the most challenging area of the company’s business. The group responded by scaling back its retail network.
“In contrast, our expansion in mainland China continued irrespective of moderate economic developments and volatile financial markets, impacting overall consumer appetite considerably.”
The group also opened in new cities like Changchun and Nanning, and now has a diversified retail presence spanning 22 cities.
Market turnover generated by its Hong Kong segment declined 1.9 per cent to $1556.1 million, a “rather satisfactory” development against a 2.7 per cent cutback in total trading area. Hong Kong contributed 42.7 per cent of the total turnover, compared to 46.7 per cent in the same period a year ago.
Largest contributor
The group has extended its foothold in China, with growth of 12 per cent to $1598.1 million, contributing 43.9 per cent (up from 42 per cent) to total turnover to become the largest revenue contributor.
IT says the overall dynamic behind the sales growth in its Japan segment was similar to what was seen in the first quarter. “More specifically, we continued to witness overwhelming responses to the collections of our A Bathing Ape brand alongside consistent positive growth in inbound tourist flow.”
Turnover in Japan grew by 28.4 per cent in local currency to JPY4796.3 million (US$45.9 million), and there was an increase of 46.6 per cent in Hong Kong dollars to HK$348.5 million. The Japan segment accounted for 9.6 per cent (up from 7.1 per cent) of total turnover.
While the group distributes and manages more than 300 fashion brands, during the period under review its in-house brands segment continued to be the largest revenue contributor, at 58.2 per cent (up from 56.8 per cent for the same period last year).