Department store Sincere sees losses almost triple
Investment losses and startup rental costs saw rapidly expanding Hong Kong department store operator Sincere report a loss of HK$33 million for the six months to August, nearly triple that recorded in the same period last year.
The 113-year-old company said in a filing to the Hong Kong stock exchange yesterday that it was required to book rent of HK$14 million for its new stores in Central and Mong Kok, even though the two stores had still been enjoying rent-free periods before their opening in September. The deficit was also attributed to a loss of HK$18 million incurred through securities trading.
The oldest locally owned department store in the city, Sincere stunned the market when it announced this year that it planned to open three stores within a year in what the market perceived as a bold expansion into what has become a low-margin business - squeezed by skyrocketing rents and slack local consumption.
Philip Ma, a third-generation member of the family that founded Sincere in 1900, said the company had invested more than HK$10 million in a marketing campaign to freshen up the company's venerable image.
According to the filing, turnover of the group's department store operation grew only 2 per cent to HK$209 million during the period. Although a removal sale at its flagship Central store pushed sales up by 25 per cent, those earnings were nearly offset by a downsizing of its Mong Kok store due to renovation work by its landlord.
The group's other business activities in advertising, furniture and insurance all posted losses.
Sincere will open a third new store in Percival Street, Causeway Bay - an area that features the highest rents in the world - next year. Media reports have said the rent for its 40,000 square foot store in Mong Kok is HK$6 million a month.