Giordano International recovers from early fall

In a turnaround from a 1.6 per cent drop in the first quarter, apparel retailer Giordano International recorded a 3.4 per cent rise in half-year group sales to HK$2.6 billion (US$334.8 million).

Gross profit increased by 3.8 per cent and gross margin improved by 0.2 points.

Comparable store gross profit (CSGP) rose by 6.6 per cent though comparable store sales (CSS) reached only 4.6 per cent growth. The company says the increase was primarily because of a better pricing/merchandising mix, but the figures were dampened by the early lunar new year shortening sales of winter merchandise.

Group gross profit edged up 3.8 per cent to $1.566 billion, primarily because of non-performing stores being closed in the past few years. Group gross margin was up by 0.2 points to 59.8 per cent, mainly because of depreciation of the renminbi as most products were sourced from China. Giordano says sourcing from Bangladesh and Vietnam will help maintain or improve future gross margin.

While China’s total sales fell, operating profit grew by 5 per cent, mainly because of improved profit from e-commerce, gross margin improvement and control of running expenses.

E-commerce sales surged 26.6 per cent, contributing to 16.2 per cent of China brand sales (12.7 per cent for the same period last year). The company attributes the increase to improved merchandise mix and logistics.

Strong growth

Regional operating profit recorded strong double-digit growth, particularly for Indonesia, Malaysia and Singapore. This was generally attributable to improved gross margin and expense
control.

Early Ramadan and improved merchandise assortment benefited both Indonesia and Malaysia. The operating profit of Malaysia grew by 47.2 per cent and that of Indonesia by 37.1 per cent.

In Singapore, operating profit was up 35.1 per cent, mainly because of gross margin increasing by 2.1 points to 62.6 per cent despite a stagnant economy and low tourist traffic.

In Thailand, operating profit was virtually the same.

South Korea (a 48.5 per cent JV with an independent management team) reported a net profit increase of 28.8 per cent through better cost control, the closure of non-performing stores and enhancement in gross margin.

Worldwide, there were 16 fewer Giordano stores at the end of June, mainly because of 33 non-performing stores being closed in India, where the group is restructuring the business. This trimmed the network to 2371 stores in more than 30 countries, including 1243 standalone stores. Most are in China (where stores expanded from 896 to 913, all in the franchise network), South Korea, Southeast Asia and the Middle East.

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