Giordano warns of slowdown in the second half

PUBLISHED : Wednesday, 31 August, 2011, 12:00am
UPDATED : Wednesday, 31 August, 2011, 12:00am


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Casual wear chain Giordano International yesterday warned of slower profit growth in the second half after reporting a 71 per cent rise in interim net profit.

Company chairman and chief executive Peter Lau Kwok-kuen said sales growth stayed in high double digits in July and August, but might slow in the second half. The company is considering raising prices this year.

Giordano's net profit rose to HK$346 million for the six months to June, from HK$202 million a year earlier. Revenue grew 24 per cent to HK$2.6 billion for the period.

Mainland business, the biggest single contributor to group sales, grew 20 per cent to HK$953 million in the first six months of the year, while markets in Hong Kong, Taiwan and the other Asian-Pacific regions grew between 24 and 26 per cent.

As of June 30, Giordano had 1,262 self-operated and franchised shops on the mainland, 261 in Hong Kong and Taiwan, and 391 elsewhere in Asia. Lau said aggressive expansion in the mainland market would slow this year but it still planned to open 200 to 300 new shops.

The group's gross profit market improved 1.8 percentage points to 59.7 per cent thanks to increased sales volume, better control of markdowns, improved advertising and promotion activity and adjustments to its product mix.

The company said these efforts had helped to offset pressures caused by rising cotton prices during the period. Lau said rents rose 14 per cent in the first half, but were still at an acceptable level.

Same-store sales growth, a key measurement of profitability, rose to 13.5 per cent in the first quarter, from 5.7 per cent in the fourth quarter of last year. It dropped to 11.1 per cent in the second quarter because of weaker sales on the mainland. The company attributed this to a year-on-year reduction in tourism in Shanghai following last year's World Expo.

Giordano's stock has risen significantly in recent months as Chow Tai Fook Jewellery chairman Cheng Yu-tung used several purchases to raise his Giordano stake to 18.07 per cent, making him the company's largest single shareholder. The tycoon earlier denied plans to buy the company, saying he only considered it as a good investment.

Giordano declared an interim dividend of 15 HK cents per share for the period. Shares closed up 18 per cent to HK$6.45 yesterday, the biggest intraday gain in more than two years.