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Joyce Boutique Holdings positive despite HK$54 million loss

Joyce Boutique Holdings reported another loss last financial year as sales fell again – but at a slowing pace.

As Hong Kong’s declining retail sales levelled off in the third quarter and reversed into a healthy increase in the fourth, the fashion retailer managed to halve the rate of its sales slump, netting HK$860.7 million (US$109.6 million), compared with $954.4 million the previous year.

“Two consecutive years of negative growth in Hong Kong’s retail sector extended into the first half of the financial year. A 19.4 per cent drop in first-half turnover narrowed to a 9.8 per cent decline for the full financial year following an improvement in sales during the second half of the year,” the company said in its full-year results statement.

Joyce Boutique said the decline was partly due to the closure of stores, however the net number of shops trading was unchanged at 39, 25 of them in Hong Kong.

Those included three multi-label Joyce stores, one Joyce pop-up corner in the Lane Crawford IFC store, eight mono-brand shops, 12 Joyce Beauty shops and one Joyce Warehouse outlet. It had a further six stores in Mainland China (including two multi-label Joyce stores, two Joyce Beauty shops and two Joyce Warehouse outlets) and eight Marni shops in Hong Kong and Taiwan under its 49 per cent-held joint venture partnership with Marni Group.

The group opened a Joyce Beauty shop in the Yuen Long Yoho Mall in Hong Kong in July and two Joyce Beauty concession corners in Lane Crawford stores in Shanghai and Chengdu in December. It closed three non-performing shops.

Profitability suffered as a result of continued weakness in sales and margin, despite reduced operating costs. Gross margin declined by one percentage point.

The net loss attributable to owners of the company totalled $54.7 million for the year,

compared with a loss of HK$41.9 million in the previous year.

The Hong Kong division’s operating loss for the year rose to $50.7 million from $31.8 million in the previous year, reflecting a 6.5 per cent fall in sales. The Mainland China division’s operating loss narrowed to $2.4 million from $3.7 million the previous year, after the closure of underperforming shops.

“While the business outlook remains somewhat uncertain, the group targets to reduce its

operating losses,” the company reported.

“Despite a gradual recovery in the retail sector and growth in sales driven by a recent rise in inbound tourism, Hong Kong as a luxury-shopping destination still faces stiff and growing competition from other Asian markets, and sustaining the current rebound will be challenging. Moreover, rental levels in prime shopping locations remain high relative to revenue, and the online shopping trend continues to adversely impact local brick-and-mortar retail operations.”

The group said that going forward it remains focused on restoring growth in comp-store sales, driving store traffic and gaining new customers, through enhanced product offerings, and innovative in-store events and marketing.

“Customer loyalty and acquisition programs and professional personal-stylist services are being enhanced to strengthen customer engagement and increase customer visits and spending levels.

However, the various challenges that face the luxury fashion retailing industry generally and the company specifically should not be underestimated. Substantial pressure on trading performance would not easily cease.”

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