Weakening yuan, possible China slowdown worry Sogo store operator as profit plunges by half
The Sogo Causeway Bay store recorded a 20.1 per cent growth in sales in the first six months of 2018 and a 42.8 per cent increase at the Tsim Sha Tsui branch
A weakening yuan and possible slowdown in China’s economy could affect the spending of mainland tourists in the city in the second half of the year, Lifestyle International Holdings, the operator of the popular Sogo department stores, said in its outlook after profit plunged by nearly 50 per cent in the first six months on lower investment income.
“It has been almost two months into the second half of the year and we see the growth momentum is still there despite the [yuan’s impact],” Thomas Lau Luen-hung, chairman of the group, told a press conference on Monday.
“I believe we will see the sales growth for the second half to be in the high single-digit to low double-digit range.”
Lifestyle, which reports two sets of numbers for sales, reported a 23.5 per cent rise in gross sales proceeds to HK$5.76 billion, and 26.2 per cent rise in turnover at its department store operations to HK$2.11 billion “because of the increasing consumer demand buoyed by Hong Kong’s strong labour market and rebound in the number of mainland tourist arrivals.”
The Sogo Causeway Bay store recorded a 20.1 per cent growth in sales in the first six months of 2018 and 42.8 per cent increase at the Tsim Sha Tsui branch.
The group’s net profit attributable to owners of the company fell to HK$882.9 million from HK$1.7 billion a year earlier on the back of declining investment income, which fell to negative HK$56 million in the first six months of the year versus a gain of HK$328 million a year earlier.
The company attributed the plunge in profit this year mainly to losses sustained from investment income and lower revaluation gains from its investment properties. Last year’s profit was also boosted by a one-off gain of HK$420.8 million from the disposal of a majority stake in a subsidiary last year.
“Amid a very volatile stock and foreign exchange market, we sustained tens of millions loss from our investment portfolio during the period,” said Terry Poon Fuk-chuen, chief financial officer of Lifestyle International Holding.
The company had around HK$6.7 billion cash and bank and time deposits, while its financial investments amounted to HK$4 billion as of the end of June.
Lifestyle also provided an update on its upcoming Kai Tak property project, which consists of two 18-storey towers with a gross floor area of 101,000 square metres, saying that construction is proceeding as scheduled and is expected to be ready in 2022.