Fashion retail giants eye stake in Giordano

PUBLISHED : Saturday, 02 June, 2007, 12:00am
UPDATED : Saturday, 02 June, 2007, 12:00am


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Three global clothing retail giants are separately considering buying a substantial stake in Hong Kong-listed Giordano International, according to sources.

Esprit Holdings and Spanish retailer Zara are the latest comers in the quest for a stake in one of Asia's largest clothing chains, joining yet another bid by Tokyo-listed Uniqlo operator Fast Retailing, the sources said.

The three retailers have only limited presence across the region and see some form of link-up with Giordano - which has 1,793 shops across Asia - as a way of rapidly boosting their exposure, especially on the mainland.

Giordano issued an announcement to the stock exchange stating that it had 'no negotiations or agreements relating to intended acquisitions or realisations which are discloseable' under listing rules, after its shares rose 2.5 per cent yesterday to close at HK$3.69 on the heels of a 7.14 per cent surge on Thursday.

Some analysts had attributed the jump to the retailer on Tuesday releasing better than expected first-quarter sales figures, showing revenue rose 15.3 per cent over last year and same-store sales jumped 22 per cent on the mainland and 8.9 per cent in Hong Kong.

Esprit spokesman Patrick Lau yesterday shrugged off questions about whether the two retailers were in talks, saying only 'the company had not posted any announcement'.

The Europe-focused retailer had 242 stores in Asia at the end of December last year, including 60 joint-venture outlets on the mainland.

Uniqlo opened its first store on the mainland late last year and Zara, which has four Hong Kong stores, has nine on the mainland. Uniqlo could not be reached for comment yesterday while a spokeswoman for Zara said the company would not comment on speculation.

Giordano had 1,793 stores across Asia at the end of March, including 741 outlets on the mainland, 236 in Taiwan and 96 in Hong Kong. It plans to open 120 stores this year, including 50 on the mainland.

Giordano spokesman William Yue yesterday denied the retailer was in talks with any of the three firms.

Analysts say Giordano is vulnerable to a takeover because institutions, including Aberdeen Asset Management and JP Morgan Chase, are its top five shareholders, with a combined stake of almost 51 per cent. The management holds less than 3 per cent.

Fast Retailing announced its intention in August last year to buy a stake in Giordano but changed its mind a month later following a surge in the retailer's share price.

Peter Lau Kwok-kuen has been chairman of the company since founder Jimmy Lai Chee-ying resigned from the post in 1994. Mr Lai then sold his 27 per cent stake in 1996, leaving Giordano without a key shareholder.

Giordano's net income dropped 50 per cent to HK$205 million last year while sales declined 0.9 per cent to HK$4.37 billion. The earnings drop was partly due to a one-off tax expense imposed by the central government and its aggressive discounting strategy due to warmer weather.

However, the company paid dividends almost twice the amount of its earnings last year, something analysts considered a move to retain shareholders' confidence in the cash-rich company and diminish its attractiveness as a takeover target.