Sa Sa International Holdings blames overexpansion in preparation for the opening of Hong Kong Disneyland last year for an 8.4 per cent fall in its full-year net profit to $185.2 million.
The result still surpassed an average estimate of $182.5 million profit by 11 analysts in a Thomson Financial survey. Turnover for the year to March rose 13.3 per cent to $2.62 billion from $2.31 billion a year ago.
Chairman and chief executive Simon Kwok Siu-ming said overexpansion - which included opening new stores in prime areas and staff hiring and training - had led to a 4 per cent drop in sales at comparable stores and hurt net margins.
Chief financial officer and executive director Guy Look said that Sa Sa, Hong Kong's biggest cosmetics retailer, had overestimated the number of tourists drawn to the city by the theme park.
Mr Kwok said another key factor that weighed on earnings was rising rents in Hong Kong and Macau, which represented 9.6 per cent of its regional turnover, up 2 percentage points from the previous financial year.
'We expect rents to stabilise this year; we don't see any trend that rents are dropping,' Mr Kwok said.
Sa Sa operates 87 stores in Asia - 53 in Hong Kong and Macau, two in Shanghai, nine in Taiwan, 11 in Singapore and 12 in Malaysia. Revenue from the Hong Kong, Macau and Shanghai stores made up 88.3 per cent of the group's total turnover.