Le Saunda misses sales-growth target as shoe inventory climbs

PUBLISHED : Wednesday, 26 October, 2011, 12:00am
UPDATED : Wednesday, 26 October, 2011, 12:00am


Footwear retailer Le Saunda Holdings plunged as much as 14 per cent yesterday after reporting lower-than-expected same-store sales growth and a significant increase in inventory.

Le Saunda's chief executive Alice Lau Shun-wai said yesterday that same-store sales grew 12.5 per cent for the six months to August, lower than the group's target of 15 per cent. But the sales picked up quickly during September and the National Day holiday in October, with same-store sales jumping about 20 and 15 per cent in Hong Kong and mainland stores respectively.

By the end of August, the company completed 40 per cent of its whole-year sales target.

'We do not rule out offering discounts if we cannot achieve our sales goal in the rest of this financial year,' said Lau.

Le Saunda, which runs 840 shops in Hong Kong, Macau and the mainland, posted a 16 per cent increase in net profit to HK$70 million. Total revenue grew 23 per cent to HK$655 million. The company reported a nearly 20 per cent increase in inventory balance, which it attributed to early production and delivery of goods for next year. This resulted in longer stock turnover to an average 210 days, from 172 days a year earlier.

'Expecting a more volatile external environment in the second half-year, the group has taken the initiative to clear stock since September through various channels such as its permanent and temporary factory outlets,' the company said.

Lau expected that 70 per cent of the inventory, or 600,000 pairs of shoes, could be sold in the second half of the financial year. She believed the gross profit margin could remain at 63 per cent, similar to that in the first half, thanks to a higher profit margin in winter products.

During the period, the mainland market contributed HK$548 million of sales revenue, accounting for 83 per cent of total revenue. Hong Kong and Macau shops generated HK$82 million. The export business, which amounted to 3.7 per cent of the company's revenue, dropped by 66 per cent year on year because of weak demand from European markets.

Looking ahead, the footwear retailer warned that uncertainties in the US economy and the relapse of the European debt crisis had generated concerns over the global economy and might affect buyer sentiment.

The company said it would take a prudent expansion approach by setting up self-owned stores in second- and third-tier cities, mainly county-level cities where it had no presence. It aimed to establish 1,000 outlets by August next year.

Le Saunda declared an interim dividend of 5 HK cents per share for the period.


The number of years Le Saunda has been operating in Hong Kong. In 1992 it was listed on the main board of the HK Stock Exchange