Lilang plans overhaul after profits drop 12.8pc

Menswear firm China Lilang plans to reorganise existing stores, after reporting poor first-half results yesterday.

The company's earnings during the period fell 12.8 per cent to 242.3 million yuan (HK$304.6 million) as turnover dropped 13.2 per cent to 1.09 billion yuan on weak retail sales amid a slowing economy. Lilang cited high inventories from last year as a drag on performance.

"As China's macroeconomy slowed, many apparel companies suffered sales decline in 2012, making overstocking a prevalent issue in multiple categories," an AT Kearney report said.

Total retail sales of garments, hats, footwear and knitwear on the mainland rose 11.9 per cent year on year in the first half, 5 percentage points lower than the growth seen in the previous year.

Lilang's flagship brand Lilanz accounted for 92.7 per cent of the company's total turnover. L2, its other brand targeting younger consumers, contributed 7.3 per cent. Overall, Lilang maintained a net profit margin of 22.2 per cent, an increase of 0.1 percentage point, helped by stable material costs and supply chain improvements, chief financial officer Brenda Ko said.

It closed 26 Lilanz stores and manufactured in-house, instead of outsourcing, 44.6 per cent of its products in the first half - 7.5 percentage points more than last year, Ko said. More store closures are planned.