HK Retail Sales Distorted By Holiday

Hong Kong’s retail sales grew at its weakest in three months in January, in value terms, due to a decline in tourist arrivals from mainland China and new year holiday distortions. The Lunar New Year fell in January last year but was in February this year. Retail sales in 2017 rose 2.2% in value terms over 2016, ending a three-year slump in the sector.
January tourist arrivals slid 2.6% from a year earlier to 5.33 million, ending four straight months of growth, according to the Hong Kong Tourism Board. Mainland visitors, which accounted for 77% of the total, fell 5.5% on year, in their first drop since August last year.    The total number of visitors increased last year, rising 3.2%, after declining in 2015 and 2016. Of those, mainland visitors were 3.9% higher than in 2016.

 

Briefing News

[February 17, 2017 ] Bosideng International Holdings (3998) announces that it has disposed of an equity interest in its non-down apparel brand Mogao and it closed its flagship store in London in the middle of January. The company sold its 51.004% equity stake in the non-down apparel brand Mogao for RMB40.52million after having reviewed the brand’s financial position and business performance. This will allow the Group to focus its resources on apparel brands with greater potential.

In addition, the Group has closed down its flagship store in London in January this year after having considered the economic uncertainty. The property where the flagship store used to be has been rented out temporarily. The Group may consider entering the British market again when the business environment is favourable. In 2011, the Group acquired the property and established its first overseas flagship store there. The Group has gained valuable experience in an overseas retail market and enhanced its reputation there and in the capital market after having operated the flagship store for several years.

 

Personal Care Products maker Vinda Net profit doubled to HKD654 million

Personal Care Products maker Vinda International Holdings Limited (stock code: 3331) said revenue grew by 24.3% to HKD12.1 billion in 2016, representing a 13.7% of organic growth.  Gross profit increased by 29.0% to HKD3.8 billion, benefited from a lower wood pulp cost, active portfolio optimisation and higher fixed cost coverage, the overall gross profit margin expanded by 1.2 percentage points to 31.7%.  
EBITDA up by 37.6% to HKD1.7 billion and EBITDA margin expanded by 1.4 percentage points to 14.0%, operating profit grew by 33.9% to HK$1.0 billion and operating margin increased by 0.6 percentage points to 8.4%.  Net profit rose by 107.8% to HKD654 million and net profit margin up 2.2 percentage points to 5.4%, the company said, adding sales of e-commerce continued to grow well, accounting for 18% of the total sales. The company proposed final dividend of 12.0 HK cents per share (2015: 5.0 HK cents),  up by 140% from a year earlier, the company said, adding together with the interim dividend, total dividend for 2016 would be 17.0 HK cents per share (2015: 10.0 HK cents)
Revenue from Tissue segment was HKD10.0 billion, accounting 83% of the total sales. Revenue from Personal Care segment was HK$2.0 billion, accounting for 17% of the total sales (2015: 3%). The increased proportion primarily came from the new income stream from SCA Asia business since 2016Q2. Total foreign exchange losses reduced substantially to HKD45 million (2015: HKD309 million),  due to the increased proportion of Renminbi borrowings. Net gearing ratio reduced to 59% (2015: 88%)
Mr. Christoph Michalski, CEO said, “2016 was a difficult year with a slowing macro-economic development in key Asian markets, the ongoing devaluation of the RMB and a continued softening in the physical off-line retail sector. Despite all these challenges,Vinda has delivered a solid top-line growth, broadened its profitability and improved the working capital. The e-commerce channel has again performed well and maintained the No.1 market position. These positive results were primarily driven by our consistent brand building, innovation, trading up through an enhanced product mix, a relentless quality focus and a continuous improvement in operational efficiency.
 
Down the road, we will continue the development with four priorities: (1) drive Tissue business in China, (2) broaden Personal Care presence in China, (3) drive the growth of Personal Care business in Asia and roll out Tissue business to the region, and (4) build up B2B business.”
 
 Mr. Li Chao Wang, Chairman said, “We embarked on our new Five-Year journey in 2016. Our ambition is clear, that is to become a leading hygiene company in Asia by securing the forefront position in the tissue market and speeding up the expansion of our personal care business.
 
The year 2017 marks the 10th anniversary of our listing, a milestone that marks our transformation over the past decade, into the truly international and multi-category hygiene company that we are today. We, as always, will work in concert relentlessly to ensureVinda grow and bring sustainable returns as we move forward.”
PhotoSocio / Pixabay

Fashion Brands Operator I.T Annual Result 2016

I.T Limited reported gross profit grew by 9.0% to HK$2,209.2 million, while gross profit margin increased by 0.9 percentage point to 60.6% amid difficult times and promotional headwinds. Total turnover increased by 7.4% to HKD3.64billion.

 

 

The company says the operating environment of the fashion retail business in the first half of the fiscal year continued to be suppressed by the same adverse economic factors as in the previous year. External market factors, such as the persistent cost inflation in operating retail channels, continued to place downward pressure on the Group’s profitability, particularly in the Hong Kong segment. As a result, total operating cost ratio of the Group increased by 0.5 percentage point to 57.6%. Rent-to-sales ratio (including rental charges and building management fees) remained flat at 26.5%. Staff cost-to-sales ratio (excluding share option expenses) increased from 16.3% to 17.0%.

 

Operating profit (adjusted) increased by 12.1% to HK$125.0 million whereas net profit (adjusted) increased by 9.2% to HK$39.1 million. Basic earnings per share were 3.2 HK cents against the basic loss per share of 2.6 HK cents for the corresponding period in 2015. The Board does not declare the payment of an interim dividend for the six months ended 31 August 2016.

 

The company management said looking specifically in theHong Kong market, the overall market conditions have remained very challenging in the midst of an uncertain macroeconomic landscape and volatile financial markets. Currency headwinds continued to impact domestic spending momentum. The cost of operating retail channels, particularly rental and staff costs, continued to rise. This was an area that placed significant pressure on the profitability of the Group’s Hong Kong segment and remained the most challenging area of the Group’s business. As a result, retail sales in Hong Kong declined by 2.0% to HK$1,540.2 million, with comparable store sales growth registered at -0.9%. Gross margin increased by 2.0 percentage points to 58.9%, primarily a result of a more favorable mix of sales toward in-house brands and a slight decrease in markdowns in relation to sales during the period. However, such enhancement in gross margin was not sufficient to completely offset a decline in efficiency measured by operating costs on sales. An operating loss of HK$140.0 million was recorded for the six months ended 31 August 2016.

 

The Group is gratified with the progress in expansion that it has achieved so far in Mainland China as it has successfully capitalised on multiple growth opportunities and has extended its self-managed store presence to new cities such as Changchun and Nanning. Total retail sales of the Group’s Mainland China business increased by 14.0% to HK$1,523.7 million, attributable to not only the increase in total trading area but also a positive comparable store sales growth of 4.6%. Gross margin decreased by 0.6 percentage point to 58.4%, primarily a result of exchange differences from the devaluation of Chinese Renminbi over the previous period. Operating profit increased by 4.8% to HK$82.0 million.

The company said its Japan segment has continued to outperform benefiting from the overwhelming responses to its collections of all brands within the A Bathing Ape group, as well as the increase in inbound tourist traffic growth during the period. Sales of Japan business increased by 28.4% to JPY4,796.3 million, whereas sales in Hong Kong Dollar terms grew by 46.6% to HK$348.5 million. Gross margin landed at 71.6%, compared to 70.5% in 1H FY15/16. Operating profit increased by 52.6% to HK$144.5 million.

 

The Group maintained a solid balance sheet, with cash and bank balances amounting to HK$1,766.4 million and a net cash position of HK$343.2 million as at 31 August 2016.

 

HK Fashion Brand Company Sees Luxury Fashion Demand Dip

Sitoy Group Holdings Limited (the “Company”, together with its subsidiaries, the “Group”; stock code: 1023), a brand management and retailer, and large-scale outsourced manufacturer of luxury handbags, small leather goods and travel goods, is pleased to announce today its annual results for the financial year 2015/2016 (“FY2016”).

 

During FY2016, the Group’s revenue decreased by 16.1% year on year to HK$2,837.0 million. This decrease was primarily attributable to the decrease in demand from the high-end and luxury brand customers. However, the impact was partially offset by an increase in retail segment sales.

 

During the year, due to stringent cost control, as well as depreciation of the RMB against HK dollar, the Group’s gross profit margin increased slightly to 27.0%, while profit attributable to owners of the Company decreased by 10.1% year on year to HK$370.1 million.

The Group’s basic earnings per share were HK36.96 cents for the year. The Board recommended the payment of final dividend of HK13 cents and special dividend of HK15 cents per share for the year ended 30 June 2016.

 

Commenting on the Group’s results, Mr. Teras Yeung Wo Fai, Chief Executive Officer of the Company, said, “During the year, against the backdrop of weak global consumer sentiment, various major brands not only placed their focus on destocking, but also adopted an increasingly conservative attitude in placing their orders for the coming season. As a result, the Group’s results of operations inevitably came under pressure. To maintain consistent quality and services to its customers, the Group will continue most of its manufacturing operations in China despite rising labour costs, mainly due to their higher level of craftsmanship and well-developed supply chain and logistic facilities. Leveraging the Group’s enhanced operational efficiency of its retail network, despite the overall sluggish retail environment, the retail business achieved stable growth during the year. Moreover, with the reinforcement by the Group’s promotional and marketing campaigns across the on-line and off-line sales channels to build up the brand image of TUSCAN’S and Fashion & Joy, together with the implement of cost control policies, the retail business has recorded pleasing results for the year. The Group continuously upgrades itself to meet ever-changing requirements of both existing and new customers. For the year under review, the Group has made its best endeavours to tap new opportunities under a challenging business environment.”

 

During the year, revenue from manufacturing business decreased by 15.4% year on year to HK$2,767.9 million which was mainly due to decrease in demand for high-end and luxury brand products in the worldwide market. However, new orders generated from the Group’s effort in actively developing businesses with certain high-end and luxury brand names in international and China markets, have partly offset effects of lower demand from existing customers.

 

During the year, the Group’s retail business continued to grow and diversify. Revenue from the retail business increased by 10.3% year on year to HK$119.6 million, demonstrating enhanced operational efficiency of its retail network. Revenue from the retail business accounted for 3.35% of the Group’s total revenue, a relatively stable level as compared to FY2015. As of 30 June 2016, the Group owned and operated 51 retail stores, of which, 6 stores were situated in Hong Kong, 1 in Macau and the remaining in China.

 

During the year 2016, the Group has obtained the exclusive license rights from two international brands, Kenneth Cole and Bruno Magli. By obtaining the license rights, the Group has successfully diversified and enriched its retail brand portfolio. With the addition of Bruno Magli and Kenneth Cole to the Group’s retail portfolio, the Group reached the goal of multi-brand development.

 

Commenting on the prospects, Mr. Michael Yeung Wah Keung, Chairman of the Group said, “Looking ahead, with stalled recovery of the China economy and uncertainties stemming from the worldwide markets, coupled with keener competition in the industry, the Group is well-equipped to face the upcoming challenges. To withstand this difficult environment, the Group will continue to step up its efforts in research and development of its products and technologies. Moreover, the Group shall source quality raw materials with competitive price, and continue to optimise and streamline production procedures to boost competitiveness of the Group and satisfy brand customers’ demands. Meanwhile, the Group will increase the proportion of the development of retail business by actively growing its existing brands, TUSCAN’s, Fashion & Joy, Bruno Magli and Kenneth Cole in both China and Hong Kong, while adopting a prudent approach in seeking ideal locations for new stores, and enhancing operations and efficiency of its existing stores. In order to optimise its product and brand portfolio, the Group will actively capture business opportunities by acquiring suitable high-end luxury brands. Despite mounting challenges and a difficult operational environment in the coming year, the board of directors is confident that it can weather the storm and grow further.”