The future of the Wanko Singapore stores is under a cloud after the Hong Kong parent Veeko International reported a trading loss.
Sales in Singapore fell 21.8 per cent, after Veeko shuttered three of its eight stores there.
“Over the past few years, the market environment in Singapore has been very challenging, and the group has closed down under-performing stores to alleviate the negative impact on the overall results of the fashion business,” the company said in its results filing.
“It is expected that if there is no sign of recovery in sales, the group will continue to scale down its business in this market.”
Veeko, which owns the Colormix and Morimor cosmetics store chains in Hong Kong and Macau, has reported a group-wide sales decline of 9.4 per cent in the last financial year, to HK$2.017 billion (S$358.4 million) And it has turned a profit of HK$58.9 million in 2016 to a loss of $25.89 million (S$4.6 million) in the last year.
Sales in its cosmetic stores, which account for 79.5 per cent of turnover, fell 6.9 per cent while fashion store sales fell 17.9 per cent to HK$413 million (S$73.4 million).
The gross profit margin of fashion business was 67.1, up from 65.5 per cent the previous year, but the gross profit margin on the cosmetics business fell by 1.8 percentage points to 32.8 per cent.
At the end of March, Veeko International operated 119 fashion stores in Hong Kong, Macau, Singapore and Mainland China under the Veeko and Wanko banners, with nine closing during the year.
“The decrease in the number of stores as compared with the same period last year was mainly attributable to the restructuring of its retail network by the group in overseas markets, particularly in Singapore and China, to alleviate the negative impact on the overall results of fashion business in the future,” the company said.
The Hong Kong retail market was “extremely weak”, resulting in a decline of 17.9 per cent in the turnover of the group’s fashion business. But tighter control of production costs boosted the gross margin to 67.1 per cent.
The fashion business recorded a segment loss of HK$8 million (S$1.4 million), 9.6 per cent narrower than the previous year’s segment loss.