Higher margins have helped boost Hong Kong Lacoste reseller Crocodile Garments’ full-year profit.
Crocodile Garments, which also has property interests, says sales in the year to July 31 remained relatively stable at HK$265 million (compared with $264.1 million last year), but gross profit rose by 7 per cent thanks to a higher gross margin in apparel sales.
However, the company’s clothing and accessories operations still lost $40.4 million for the year – albeit an improvement on the previous year’s deficit of $57.1 million – on sales down by half a per cent at $207.8 million.
The company said the Hong Kong retail market rebounded on increased visitor numbers from the mainland and improved local consumer sentiment. During the year it closed a net two Lacoste stores and two Crocodile stores, leaving six and 16 respectively. Some stores were relocated to take advantage of more favourable rents, with unprofitable ones closed.
On the mainland, the company continued the restructuring of its sales channels “as a long term strategy to tackle the tough operating conditions of exorbitant rents and rising wages there” neared completion.
As at the end of July, the company had 16 stores on the Mainland, six of them self-operated (three more than last year) and 10 run by franchisees. Mainland sales revenue reached $11.4 million, down $400,000 year on year.
“During the period of restructuring, the group had simplified its merchandise mix and product design, consolidated the supplier chains and centralised the inventory processing to defuse the negative impacts of the corresponding slide in revenue,” the company said.
“The accelerated slowdown of economic growth and the continuous deleveraging in the mainland has tightened the liquidity. Consequently, it confounded the group’s licensing business of the Crocodile brand and the recoverability of the royalty income from the licensees. For the year to July, royalty income was just $908,000, compared with $23 million last year and company has provided for doubtful debts of $26.7 million.
