Lifestyle pins earnings hopes on stimulus package
Lifestyle International Holdings expects Beijing's stimulus package to produce positive results in the retail sector in the second half despite earnings dropping 26.8 per cent in the first six months of the year.
The company, a leading Hong Kong department store operator, said first-half net profit declined to HK$443.71 million from HK$606.25 million on the absence of fair-value gains from properties and the cost of new stores in Suzhou and Dalian.
Excluding the one-off fair-value gain of HK$130 million last year, net income was down 6.8 per cent.
Revenue grew 4.7 per cent to HK$3.84 billion.
The company declared an interim dividend of 11 HK cents a share, down from last year's 12 HK cents.
'The impact of [the central government's] stimulus package is expected to be more apparent in the second half,' said managing director Thomas Lau Luen-hung (right). 'We stand to benefit in the next round of economic growth.'
Chief financial officer Terry Poon said the company expected its mainland business to account for 50 per cent of total revenue in three to five years.
Lifestyle opened stores in Suzhou and Dalian early this year and projects in Tianjin and Shenyang are scheduled to open between 2010 and 2012.
Mr Lau said the new stores needed two to three years to record net profits as the amortisation rate and operating costs were relatively high at the initial stage. But he said the resilient growth of Hong Kong's Sogo and Shanghai's Jiuguang department stores would offset losses brought by the new operations.
'Suzhou Jiuguang could book 100 million yuan (HK$113.4 million) or more in initial losses for this year, but it should be able to achieve cash-flow break-even in one to two years,' said analyst Mavis Hui at DBS Group Research.
The company is trying to maintain the scale and profits of its Hong Kong business and will focus on the mainland market for growth.
Anne Ling, an analyst at Deutsche Bank, said last month's sales at Lifestyle's Hong Kong Sogo would be affected by the outbreak of H1N1 flu, although it would not be a significant concern in the medium to long term. The company did not disclose sales figures for last month.
Lifestyle closed 1.07 per cent lower yesterday at HK$11.12 after the firm announced its interim results.
