Giordano fails to rebound from slump

PUBLISHED : Friday, 25 August, 2006, 12:00am
UPDATED : Friday, 25 August, 2006, 12:00am


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Chairman blames erratic weather and weak consumer sentiment in the region as profit declines 19.3pc

Giordano International, a Hong Kong-based casual retailer that operates in more than a dozen Asia markets, said half-year profit fell 19.3 per cent as improved consumer sentiment in the second quarter failed to offset the slump in the first three months.

Net income was HK$151 million for the six months to June, compared with HK$187 million a year earlier. Turnover dropped 6.1 per cent to HK$2.02 billion, down from HK$2.15 billion previously.

'Erratic weather patterns in greater China and weak consumer sentiment in Southeast Asia slowed sales in the first quarter,' but performance was stronger in the second quarter, Giordano chairman Peter Lau Kwok-kuen said.

Sales in Taiwan fell 17.6 per cent to HK$322 million while those in Singapore dropped 7.3 per cent to HK$190 million, more than wiping out a 1.7 per cent gain on the mainland to HK$472 million and a 1.9 per cent rise in Hong Kong to HK$420 million.

Overall, the retail and distribution division's sales fell 4.3 per cent to HK$1.87 billion with same-store sales dropping 5.3 per cent.

Sales of its garment trading manufacturing unit fell 7.7 per cent to HK$480 million.

Gross margin was 50.5 per cent during the first half, compared with 50.9 per cent a year ago, partly because it offered bigger discounts on end-of-season sales to clear inventories.

Despite the decline in profit, Giordano kept its 4.5 HK cents interim dividend and two HK cents special dividend per share unchanged, effectively lifting the payout ratio to 64.4 per cent from 50.8 per cent.

Mr Lau said yesterday the increased payout was a result of the company's high cash level, which fell to HK$678 million at the end of June from HK$903 million a year ago, and not a move to make investors keep their shares.

Japan's Fast Retailing was approaching Giordano's shareholders to buy a stake in the Hong Kong retailer as it aimed to gain access to the mainland and Hong Kong markets, sources earlier said.

Giordano's top five institutional holders, including Aberdeen Asset Management and JP Morgan Chase, control almost 51 per cent of the company, while management holds less than 3 per cent.

Analysts have said that the fact that Giordano had no single controlling shareholder had made it vulnerable to a takeover.

Mr Lau yesterday said management was interested in increasing their stakes in Giordano but was unable to do so under the listing rules.

'We have raised our stake earlier this year,' Mr Lau said.

'But because of the approach made by Fast Retailing, we cannot increase our stake until the incident is over.'

Giordano had 1,698 stores across Asia, including 714 in China, 99 in Hong Kong and 230 in Taiwan at the end of June.

Shares in the company dropped 0.87 per cent yesterday to close at HK$4.55.