Profit dictates store size at Sa Sa

PUBLISHED : Friday, 21 June, 2013, 12:00am
UPDATED : Friday, 21 June, 2013, 4:18am

Cosmetics retailing group Sa Sa International said it would halve the size of its new stores on the mainland where it is suffering losses but planned to open bigger outlets in Hong Kong where it makes most of its profit.

Net profit at the company climbed 19.7 per cent to HK$825.6 million for the year to March, compared with a 35 per cent gain in the previous financial year.

On the mainland, Sa Sa suffered a loss of HK$37 million, but that was offset by growth in Hong Kong and Macau where profit contribution climbed 21.3 per cent to HK$817.9 million.

The firm declared a final dividend of five HK cents and a special dividend of nine HK cents.

"Retail spending has been affected by the economic slowdown on the mainland. To narrow the loss, we will cut about 40 per cent of rental and staff costs by opening smaller stores on the mainland," said chairman Simon Kwok Siu-ming.

Sa Sa plans to open more than 20 new stores, each ranging from 1,000 to 1,600 square feet, on the mainland by March next year, bringing the total to 75.

"The size of the new outlets is being cut in half when compared with previous stores," Kwok said.

This is part of the company's plans to add 42 new stores across its operations over the next nine months, which will take the total to 291. Ten will be opened in Hong Kong and Macau, where the total will become 110, and the rest will go to Singapore, Malaysia and Taiwan.

He declined to give a timetable of when the mainland business would return to the black. "We have to be patient as it takes time for us to see the result after the new strategy is implemented," he said.

In Hong Kong, Kwok said the firm would open a 20,000 sqft new concept store comprising cosmetics goods, a beauty salon, a hair salon and a coffee shop in Causeway Bay next month. The store was formerly occupied by the G.O.D. lifestyle store.

"It will be our biggest store in Hong Kong. If it is successful, we will consider opening another one in Kowloon," he said.

Sa Sa saw its rental expenses in Hong Kong rise 23 per cent year on year. Kwok said the company's average rental expenses accounted for 10.4 per cent of total sales, which stood at HK$7.66 billion.

The stock fell 5.73 per cent to close at HK$7.73 yesterday before the results announcement, while the Hang Seng Index ended 2.88 per cent lower.