FASHION retailer Joyce Boutique has recovered from its disappointing results last year, while its share price remains undervalued. The company recently announced a net profit of $34.04 million, a slight increase of four per cent. This result initially appears unexciting, but, taking into account that in the first half the group posted a 37.2 per cent decline in profits to $10.2 million, the second-half profit of $23.83 million indicates a solid turnaround from the interim, and represents a 44 per cent improvement from the corresponding period in the 1992 financial year. The improvement achieved during 1993 is due to concerted management efforts to enhance operational efficiency, including an investment in computers. In addition, the company has taken steps to consolidate some of its free-standing boutiques into larger existing outlets to reduce rental expenses. Furthermore, all leases with Hong Kong Land were revised at favourable terms up to 1996, eliminating a major uncertainty on costs. These factors are expected to contribute to further sustained growth for the company in the coming years. Joyce is generally recognised as a leading fashion retailer in Hong Kong. There are now 24 boutiques and one cafe under its management, with over 66,000 square feet of sales area. These boutiques feature over 500 designer labels, and cover apparel, shoes and accessories mainly from Italy, France, the US and Japan. About 55 per cent of Joyce's purchases are made in Italy. Since August 1992, the Italian lira has been depreciating - losing over 27 per cent in value to date - due to a weak economy and the European Exchange Rate Mechanism crisis. This has provided windfall profits for the company, as purchases from Italy are now much cheaper. The company decided to keeping its prices largely stable despite double-digit local inflation. Joyce has committed itself to setting up a 38,000 sq ft''mega boutique'' in Taiwan. It will be located in the shopping podium of Far Eastern Plaza, a new Shangri-la Hotel/commercial building complex. The complex will be named the World of Joyce (Taipei), and the store will be opened in September this year. Joyce's total sales area will then have increased by 57 per cent to exceed 100,000 square feet. Joyce is also looking to the China market in light of its growing economy and the increasing affluence of the mainlanders. Joyce plans to set up a 1,300 sq ft boutique inside Seibu's Shenzhen department store in September this year. Expansion into Shanghai and other coastal cities is also planned. After two years of consolidation and careful cost-control programmes, Joyce is able to continue its growth momentum. Brokerage Sun Hung Kai Securities forecasts the company will register a 18 per cent growth to $40.21 million in 1994. Joyce's P/E ratio is only 6.2 times, which is highly undervalued.
