Giordano set for soft profit
Analysts expect low, single-digit profit growth to be unveiled when Giordano International announces its interim results today.
Brokerages such as DBS Vickers and SBI E2-Capital issued reports predicting the SAR-listed casual wear retailer would record growth in net profit of about 5 per cent for the six months to June 30.
Despite predicting flat sales growth of just 0.2 per cent in the first half, DBS Vickers said the retailer's net earnings might grow 5.3 per cent to HK$201 million.
'The expected earnings growth comes from operating margins, which are estimated to have improved from 11.1 per cent to 11.4 per cent on a better product mix and rental savings,' the DBS Vickers report said.
SBI E2-Capital took a similar view. It said that since Giordano had improved efficiency in raw materials sourcing and introduced higher-margin products it estimated a 4.9 per cent net profit jump.
SBI E2-Capital expected flat turnover growth of 1.4 per cent year on year to HK$1.76 billion due to weak sales in key markets other than Hong Kong.
'Hong Kong was the only market that registered positive [comparable] store sales growth in [the first quarter],' SBI E2-Capital's report said.
Other markets including the mainland, Singapore and Taiwan were expected to record a sales drop in the first quarter.
Sun Hung Kai Research, a unit of brokerage Sun Hung Kai, yesterday presented a view different from those of DBS Vickers and SBI E2-Capital.
The firm expected Giordano's sales growth would be larger than net profit growth. It estimated sales jumped 3.5 per cent to HK$1.8 billion while net profit edged up 0.6 per cent to HK$192 million.
'The company continues its pricing strategy so as to avoid sacrificing margins,' the Sun Hung Kai report said.
The report said the World Cup in June had heavily affected retail consumption in the region.
It said the closure of three shops in Hong Kong since February could have a negative impact on Giordano's sales.
With a share price target of HK$3.30, lower than Giordano's close yesterday of HK$3.80, SBI E2-Capital recommended a 'sell'.
DBS Vickers said the share was 'fully valued'. Sun Hung Kai maintained its 'hold' recommendation, but warned the share price 'would stay soft in the near term'.
