Giordano sets out to erase memories of past mistakes

Apparel firm sees strong growth in the Middle East while high rents hold it back in Hong Kong

PUBLISHED : Friday, 28 February, 2014, 1:10am
UPDATED : Friday, 28 February, 2014, 2:52pm

Casual apparel retailer Giordano International plans to push its main label upmarket and raise prices by 10 to 15 per cent over the next two years, leaving spin-off brand Beau Monde to focus on affordable basics.

Chief executive Peter Lau Kwok-keun said Giordano had struggled with a mass market image problem because it had expanded into the mainland too fast and set up in locations that dragged down the brand's image.

"What's holding us back is two things. The first one is memory but secondly, our locations," Lau said. "We have stores where we shouldn't have entered, at supermarkets or what we call B-minus locations," Lau said at the company's annual results briefing yesterday.

"Imagine if Louis Vuitton had a small outlet in Sham Shui Po - what it would do to their brand equity. We want Beau Monde to take Giordano's place at those supermarket locations and in two years' time hope that Giordano will be at B or B+ locations," he said.

The Beau Monde label, which will launch in the mainland in the second quarter, sells lower cost basic apparel. "It will be a bit more like the Giordano you remember from way back when," Lau said.

Profit excluding exceptional disposable gains, including the acquisition of a controlling interest in the group's Middle East business, declined 3 per cent last year to HK$663 million, hurt by heavy discounting on the mainland and currency depreciation in Southeast Asia.

The company faces high rents in Hong Kong and will slow its store openings until rent levels normalise. "We have no plans to expand a high number of shops until rent becomes more reasonable, which should happen in the next nine to 12 months," Lau said.

The company said it saw huge potential for growth in the Middle East, where sales increased nearly sixfold to HK$632 million last year.

"We see a lot of potential in the UAE for the 2020 World Expo and of course, Doha building up for the World Cup," managing director for Giordano Middle East Ishwar Chugani said.

Dividend payout remained at 40 HK cents. The firm's shares rose 2.8 per cent to HK$5.12 yesterday, while the Hang Seng Index gained 1.74 per cent.