Nan Hai Corporation has warned shareholders of an impending loss from the scaling back of its Crabtree & Evelyn business.

Nan Hai bought the beauty products retailer in late 2015, with plans to expand the store network across China, including opening shops in its 270-strong cinema chain.

But this week the company said impairments of goodwill from the Crabtree & Evelyn brand, the sale of excess inventory at discounted rates and costs associated with store closures, would lead to a reduction in its annual profit of between 25 and 44 per cent from the HK$1.60 billion achieved in 2017.

It offered no other comment, other than its results for last year will be released later this month.

At the time of the purchase, Yu Xin, MD of Nan Hai’s subsidiary Dadi Digital Cinema, said the brand would be more profitable under Nan Hai’s ownership due to economies of scale possible by using its existing supply chain network and other resources, and by boosting marketing activity.

Crabtree & Evelyn’s Canadian business entered bankruptcy protection last December, resulting in the closure of its 19 stores there as it liquidates its stock. In January, the company announced it would be exiting the Singapore market, closing all 12 stores and moving exclusively online.