Chinese shoe retailer Belle aims to 'remain steady' as profit falls 12pc
The mainland shoe retailer says it is unlikely to achieve its goal of low single-digit growth for same-store sales this year
Mainland shoe retailer Belle, which yesterday reported a 12 per cent fall in net profit for the first two months of this year, says it will be difficult to achieve its target of low single-digit growth in same-store sales this year and it is now aiming to "remain steady" with last year.
"Same-store sales growth was worse than my expectation in the first two months," said chief executive Sheng Baijiao, adding that the first two months of the year usually saw lower gross profits because it was the time to clear winter stock. Because of a change in the end of its fiscal year from December to February, starting this year, Belle reported 14 months' results yesterday.
When it announced the first 12 months' results in March, the company said it was aiming for low single-digit growth in same-store sales.
Belle said the sluggish mainland economy and intense competition were squeezing profit margins in the footwear business, but it was still confident that its margin would remain stable at about 22 per cent to 24 per cent this year. It said the performance of sportswear was hopeful, with high single-digit growth in same-store sales expected this year.
Belle distributes to sportswear brands such as Nike and Adidas and to footwear labels Staccato and Joy & Peace. A research report by BOCOM International issued yesterday said the company's margin outlook was vulnerable owing to "rapidly intensified footwear market competition and the group's high store cannibalisation risk due to its aggressive footwear store expansion strategy", and set a target price of HK$6.75.
Sheng said the company would slow the pace of store expansion and capital expenditure might be reduced as a result. "The former plan was to open about 1,000 footwear stores and 400 to 500 sportswear stores," he said. "I expect it to be lessened appropriately."
Shares of the company dropped 2.2 per cent yesterday to close at HK$8.06, compared with a 0.1 per cent fall in the benchmark Hang Seng Index.
Separately, footwear retailer Le Saunda reported a 60.3 per cent surge in net profit to HK$290 million for the fiscal year ended February 28. Revenue rose 15.7 per cent to HK$2.04 billion.
