Cosmetics retailer slows store openings and says it may not renew leases if landlords' demands are unacceptable Sa Sa International Holdings, Hong Kong's biggest discount cosmetics retailer, overcame higher rentals to report an 11.1 per cent gain in its first-half profit as it added outlets. Net profit rose to HK$75.3 million in the six months ended September from HK$67.8 million a year earlier as turnover jumped 14.6 per cent to HK$1.34 billion. Growth on a same store basis climbed 2.4 per cent in Hong Kong and Macau. Rentals rose an average 25 per cent at nine stores that had their leases renewed, helping to lift the group's overall rental 0.6 percentage point to 10.6 per cent of its turnover. Net profit margin, also hit by higher labour costs, slipped to 5.61 per cent from 5.79 per cent previously. 'The city's rentals have gone up so much that they are unacceptable in many places,' chairman Simon Kwok Siu-ming said. 'As a result, we slowed the pace of opening new shops in the first half.' Sa Sa added two shops and shut one down in the six-month period in Hong Kong, from its original plan of adding four new shops. At the end of September, Sa Sa operated 52 stores in Hong Kong out of a total of 88. The rest are in the mainland, Macau, Taiwan, Singapore and Malaysia. Five leases in Hong Kong are due to expire by the end of March next year. Mr Kwok said the group left open the possibility of not renewing some contracts if it found new rentals unacceptable. 'I don't see the city's rentals decreasing in the near future,' he said. The group's turnover from retail and wholesale of cosmetics grew 15.5 per cent to HK$1.23 billion, of which 86 per cent came mostly from Hong Kong. Sa Sa, popular with mainland tourists, expected healthy sales over the Christmas season in spite of fewer mainland visitors in the past two months, Mr Kwok said. The group is to focus more on local customers, which accounted for 55 per cent of its client base. Mainland tourists accounted for 40 per cent, with the balance of visitors from Europe and Southeast Asia. The company expects sales will benefit from the 'feel-good factor'' of local customers given the recent stock market bull run, Mr Kwok said. In China, where Sa Sa is still in its investment stage and remains in the red, the group plans to open its seventh shop by adding four in its second half. Most of the new shops will be in Shanghai, Mr Kwok said. The group's cash and bank balance shrank 19.94 per cent to HK$517.4 million as of the end of September. Capital expenditure during the period fell 36.29 per cent to HK$35.1 million. The cash-rich company kept the interim dividend the same at six HK cents per share, which exceeded earnings per share of 5.6 HK cents, against 5.1 HK cents a year earlier. Sa Sa shares closed up two HK cents or 0.72 per cent at HK$2.79 after the results were announced.