Lilang to ease up on mainland expansion

Menswear firm rakes in higher profit but will slow outlet growth amid weaker demand

PUBLISHED : Thursday, 16 August, 2012, 12:00am
UPDATED : Thursday, 16 August, 2012, 3:54am

Fujian-based menswear company China Lilang plans to slow the pace of its store expansion in the second half, despite posting double-digit growth in both turnover and profit in the first six months of this year.

For the six months ended June, the company recorded a 22 per cent increase in turnover to 1.26 billion yuan (HK$1.54 billion) from a year earlier.

Gross profit climbed 32.9 per cent to 499.4 million yuan.

Gross profit margin was up 3.3 percentage points to 39.7 per cent, thanks to the company's "efforts in streamlining the supply chain", which helped cut costs.

But Hong Kong-listed China Lilang said it would adopt "a prudent attitude" to store expansion in the current half and adjust its plans "according to market conditions to reduce risks".

"The uncertain economic environment [has] weakened consumer sentiment, which is particularly noticeable in first-tier and second-tier cities" on the mainland, China Lilang chairman Wang Dongxing said.

At the end of June, the company operated 3,386 stores on the mainland, most of them more for its core LILANZ brand and the remainder for its L2 line.

According to Wang, the company will launch a renovation project in this half to refurbish 300 to 350 retail outlets by the end of 2015.

Wang said that before the project got under way, the company planned to have clearance sales with discounts of up to 40 per cent on excess apparel inventory resulting from "unfavourable weather" in the fourth quarter of last year and the first half of this year.

Average inventory turnover was 59 days by the end of June, up by 10 days compared with a year earlier.

But Wang said the discounts would not affect the company's gross profit margin.

Wang also said the company was "very confident" that its gross profit margin for the full year would be more than 40 per cent.

Earnings per share rose 22.1 per cent to 23.2 fen compared with a year earlier.

The company declared an interim dividend of 13 HK cents a share, and a special interim dividend of 6 HK cents a share.