Sa Sa International says it plans to close as many as 20 stores in Hong Kong this year after failing to get long-term rent concessions from landlords.
That follows the closure of a net 12 stores in Hong Kong during the last fiscal year, mostly located in traditional tourist districts, such as Tsim Sha Tsui, Causeway Bay and Mong Kok.
The company says sales in the year to March fell by 47 per cent overall – and nearly 60 per cent in its key Hong Kong and Macau markets. The decline would have been even worse had the company not developed its digital sales channels in the wake of the pandemic, which has seen the border with Mainland China closed for more than a year now.
SaSa International reported a loss of US$45.3 million (HKD351.4 million) which is less than the $66.5 million (HKD515.9 million) of the previous year.
The company said 38 of its Hong Kong retail leases will fall due in the year to March 2022. “Given that landlords have pushed back from offering temporary rental relief, the group will focus on rationalising its store network and reducing store expenses to pursue its long-term goal of optimising cost structure. It is expected to close 15 to 20 stores throughout the year,” SaSa International said in a results filing.
Besides rationalising its store network, the company is refocusing to cater to a market driven by local customers. It has expanded its product range – adding protective products and personal-care items – as well as revamped in-store product displays to drive sales and build customer loyalty.
However, product promotional activity saw gross margin drop to 29.6 per cent in the first half of the last financial year, before it recovered to 34.9 per cent in the fourth quarter, finishing the year at 32.5 per cent.
During the year ahead SaSa plans to continue to build its online business, aiming for it to account for more than 50 per cent of sales in Hong Kong and Macau, compared with the current 35 per cent. It will also focus on building sales across all channels in Mainland China where it is building critical mass to a point where profit will gradually increase.
In Malaysia, where sales were down by 35 per cent last year due to Covid-19 lockdowns preventing stores from trading for long periods of time, the company expects trading to rebound quickly and break even once the pandemic is over.