Giordano Asia sales strengthen
Giordano Asia sales grew on the back of strong performances from Thailand and Hong Kong in the first quarter.
While total global group sales fell by 1.6 per cent, gross margins are on the rise and the fast-fashion retailer achieved strong growth in its Hong Kong home market.
Total sales in the three months to March 31 were HK$1.285 billion (2016: $1.306 billion), but on a constant-currency basis, the decline was more modest 1 per cent.
Gross margin rose from 57.7 per cent to 58.6 per cent, attributable to the depreciation of Renminbi between the two quarters being compared. While group sales decreased by $21 million, gross profit decreased by just $1 million due to higher gross margin. “Management believes that gross margin improvement can be maintained for the rest of the year.”
Hong Kong and Macau continued to deliver sales and gross margin growth – in March by double digits. An improvement in gross margin by two percentage points was attributed to a changed product mix and lower average product costs.
Mainland China’s online sales improved by 22.1 per cent with successful promotion campaigns. An early Chinese New Year shifted sales to franchisees from early 2017 to late 2016, and an unseasonably warm Chinese New Year was unfavorable to the apparel retail industry. Physical store same-store sales declined by 4.9 per cent during Chinese New Year but improved by 2.2 per cent in March when the spring/summer collection arrived in stores.
In Taiwan, sales fell 10 per cent, triggered by a 32 per cent decrease in Mainland Chinese tourist arrivals, and closure of non-performing stores.
Giordano Asia sales in other markets, measured in local currencies increased by 2.1 per cent with gross margin up by 1.6 percentage points. The average selling price rose 1.2 per cent while average product costs decreased by 3.1 per cent.
Indonesia gained a net of 10 stores in the past years. Giordano said it believes Indonesia’s overall performance will be satisfactory.
After more than a year of double-digit same-store sales growth, Thailand’s growth tapered off, but Giordano expects a “sustainable healthy growth rate” in the market.
In Malaysia, sales increased by 0.8 per cent on a constant exchange rate, but declined by 7.3 per cent at current exchange rates due to a severe Malaysian Ringgit depreciation against HKD between the two quarters under comparison.
Same-store sales in Singapore dropped by 4.6 per cent. In Australia sales rose 8 per cent due to strict pricing discipline and a better product mix.
The company expects India sales will continue to shrink until the operations are restructured.
And in South Korea, where Giordano has a 48.5 per cent share in a joint venture with a local operator, the gross margin went up by half a percentage point as stock levels continued to be lean, and slow-moving merchandise was replaced by fresher lines.
As at March 31 Giordano operated 2374 stores (up two year-on-year), or 2,307,400 sq ft of space, in more than 30 countries. About half of those are standalone stores.