Milan Station may see weaker sales growth
Milan Station, which trades pre-used designer handbags, may face slower sales growth as the mainland's luxury market eases this year, analysts say.
The firm yesterday posted an 11.7 per cent fall in full-year net earnings to HK47.9 million, due to a 20 per cent rise in sales costs. This was despite a 21 per cent increase in revenue to HK$879.8 million.
Excluding one-off expenses, the adjusted net profit for last year was HK$53.7 million, down 1.1 per cent from 2010.
Milan shares plunged 20.81 per cent to close at HK$1.18 yesterday. The stock has slumped 55 per cent since the firm's Hong Kong listing last May.
Eugene Mak, an analyst at Core Pacific-Yamaichi Securities, said the luxury market on the mainland and in Hong Kong would only grow 10 to 15 per cent this year amid the weakening global economy, following its rapid growth last year.
However, the firm said sales of handbags priced above HK$50,000 had risen 60 per cent to HK$506.7 million so far this year, reflecting the strong appetite for such premium products.
'The luxury market will continue to grow, yet it would be almost impossible to see a growth rate as strong as last year's,' said Mak, who estimated last year's sales growth at 30 to 40 per cent.
'We are not very optimistic about the business model of Milan Station, which is relatively easy to copy. Actually, many copycats are already emerging in these markets.'
As of December, Milan Station had 16 outlets in Hong Kong, the mainland and Macau.
The Hong Kong market drives 85.9 per cent of its total revenue, with 8.6 per cent coming from the mainland and 5.5 per cent from Macau.
Yiu Kwan-tat, the firm's chairman, said it would continue to expand its sales network in premium locations in Beijing and Shanghai.
'We will be prudently identifying the locations of new stores and focusing mainly on first-tier and second-tier cities ... particularly premier business areas in cities where many international brands have established their presence,' he said.
The total number of retail shops in Beijing and Shanghai operatedduring the the reporting period