City Chain parent records another loss, as trade war dampens sentiment
Same-store sales by watch retailer City Chain improved last year – but parent Stelux Holdings still recorded a loss of HK$34.6 million (US$4.4 million).
That deficit would have been a lot higher but for the one-off gain of $111.8 million ($15.2 million) from the sale of the company’s optical business in June last year. The company says without the gain, and various other one-off adjustments, the company would have lost $117.5 million ($15 million). However, both figures were lower than the previous year’s loss of $123.7 million. On the positive side, inventory fell 16.6 per cent to $559.8 million ($71.7 million) as of March 31.
Group turnover for the last financial year was down 3.4 per cent to $1.458 billion ($186.8 million).
The City Chain Group operates around 220 stores in Hong Kong, Macau, Mainland China, Singapore, Thailand and Malaysia together with on-line stores under the City Chain and Solvil et
Titus brands. It also has exclusive rights to the Seiko and Grand Seiko watch brands in Hong Kong, Singapore and Malaysia.
Stelux International sold its Optical 88, Egg and Thong Sia Optical businesses last year for $400 million ($51.2 million). The purchaser was an entity controlled by Stelux CEO and chairman Joseph CC Wong, also known as Chumphol Kanjanapas.
Wong said the company achieved same-store sales growth and profit in the first half of the financial year thanks to a refresh of the City Chain branding and house brand portfolio, store closures and cost reductions. However this was undermined in the second half as the trade dispute between China and the US intensified, Renminbi remained weak, tourist and domestic spending in regions where the company operates slowed down and consumer sentiment took a dive.
For the full year, City Chain’s turnover fell 5 per cent to $1.167 billion ($149.5 million) as its store network reduced by 13 per cent.
Turnover at City Chain’s Greater China business fell by 6.5 per cent, with a 19 per cent reduction in store numbers. Pre-tax loss there grew from $53 million ($6.8 million) last year to $98.9 million ($12.7 million) this year.
“Despite the challenging operating environments in the second half, year-on-year same-store sales in Hong Kong and Macau remained stable,” said Wong. Operating costs fell by 9.8 per cent.
Despite a generally weaker market environment, City Chain’s operations in Southeast Asia reported an increase in sales per shop of 8.9 per cent, with turnover remaining relatively stable, despite a 5.4 per cent reduction in the store network. However currency depreciation against a strong Hong Kong dollar say pre-tax earnings down from $4.2 million ($538,000) last year to just $800,000 ($102,000) this year. Excluding exchange losses the result was $3.4 million .
Wholesale division turnover (including Seiko) grew 3.5 per cent to $291.2 million ($37.3 million) and together with improved operational efficiencies contributed to a profit of $40.1 million, a substantial improvement on the previous year’s loss of $4.6 million.
Wong says that while uncertainties surround the completion of a trade deal between China and the US, retail sentiment is likely to remain subdued for the remainder of the 2020 year.
“Refreshment of stores will continue and capital expenditures will be prudently managed.
However, as part of the group’s long-term strategy to improve its competitiveness to adapt to changes in the consumer landscape, the group has prioritised investment in infrastructure and brand development to enhance customer interaction through omni channels so as to improve synergies between the online and offline businesses of the City Chain Group.”
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