Giordano sales fall 5pc as consumer demand weakens

Casual wear retailer sees gross profit drop 4pc on 5pc revenue dip, sparking sell-off in shares

PUBLISHED : Thursday, 01 November, 2012, 12:00am
UPDATED : Thursday, 01 November, 2012, 4:48am

Casual wear chain Giordano International reported a 5 per cent decline in sales for the third quarter as the weak economy and late arrival of cold weather weighed on consumer spending. Giordano shares fell more than 2 per cent yesterday afternoon after the company released the results. They closed at HK$6.44, down 0.92 per cent, while the benchmark Hang Seng Index gained 1 per cent.

The clothing retailer said sales for the three months to September fell to HK$1.27 billion from HK$1.33 billion a year earlier.

Gross profit dropped 4 per cent to HK$733 million.

For the first nine months of the year, gross profit fell 2 per cent to HK$2.3 billion.

Same store sales, an important measure of retail performance, slid 2 per cent during the quarter, compared with growth of 11 per cent in the year-ago period.

Sales in the mainland, Taiwanese and Hong Kong markets were down 7 per cent during the period, while in other Asia-Pacific regions including Singapore, Malaysia, Indonesia and Thailand, they increased 5 per cent.

Peter Lau Kwok-kuen, the chairman of the company, said in the filing that weakening consumer demand had continued to affect sales on the mainland and Taiwan and the unseasonably warm weather had delayed the sales of new merchandise for the autumn and winter seasons.

In Hong Kong, sales were affected by the closure of a major store last year, Lau said.

During the period, the company reduced its store network by a net 19 outlets. As of the end of September, it operated 1,323 shops on the mainland, 77 in Hong Kong, 215 in Taiwan and more than 1,000 in other places.

The company expects cost pressure would ease in the coming months as the price of cotton was likely to drop.

Compared with declining sales and gross profit, the company said its inventory improved significantly, falling to HK$446 million at the end of September from HK$605 million at end-December last year.

"The overall retail sentiment [on the mainland] is weak with less traffic in shopping malls and department stores," Lau said. "At the same time, there is a deluge of competing brands up in the mainland market, resulting in a highly competitive business environment."

He said the company would tailor merchandise for local customers and adopt a fast marketing strategy to raise the brand's awareness.