Sa Sa hit with 54 per cent profit slump as mainland numbers dwindle

Hong Kong chain store firm warns trend to continue for another year

PUBLISHED : Thursday, 23 June, 2016, 8:59pm
UPDATED : Thursday, 23 June, 2016, 8:59pm

Poor mainland sales have thumped profitability at Sa Sa International, the Hong Kong chain store company.

The firm, which sells cosmetics including skincare and baby care products, saw its net profit slump 54 per cent to HK$383.5 million in the year ended March 2016, and officials say they expect the Hong Kong retail market to “continue to face a number of challenges” in the 12 months ahead.

Its turnover in Hong Kong and Macau dropped by 14.2 per cent to HK$6,315.6 million, while same store sales fell 11.8 per cent.

Simon Kwok Siu-ming, its chairman, said the primary reason for the decline was what he called an unabated decrease in mainland tourist arrivals to Hong Kong since March 2015.

Industry figures show mainland tourist traffic to Hong Kong dropped 8.6 per cent in the last fiscal year.

“The strength of the Hong Kong dollar has seen a marked increase in outbound travel by local people, and a marked decrease in mainland China inbound tourism,” said Kwok.

“This trend is likely to continue in the coming year. Local consumer sentiment is expected to remain weak due to a slowdown in the Hong Kong economy, poor stock market performance and a declining property market,” he revealed in its annual report.

Sa Sa’s mainland turnover decreased 9.6 per cent to HK$303.8 million during the year, while same-store sales decreased 9.9 per cent, resulting in a HK$39.6 million loss.

Kwok predicted the mainland economy will remain weak, and consumer spending will slow.

“The one-visit, one-week permits issued to Shenzhen residents for travel to Hong Kong will continue to have an impact on arrivals, particularly day-trippers, and may lead to fewer transactions,” he added.

Victor Au, chief operating officer at Delta Asia Financial, agreed Hong Kong retailers will continue to face difficult trading.

“We do not expect to see any signs of recovery for the next year,” added Au.

Sa Sa’s poor performance follows that of restaurant operator Tsui Wah Holdings, which revealed on Wednesday it expected profit for the year ended March 2016 to drop by more than 50 per cent, which it also attributed to a fall in Chinese customers.

Hong Kong fast food chain Cafe de Coral also unveiled a 12 per cent fall in annual profit to HK$518 million, which it blamed on slower mainland growth and higher rents for its outlets.

Sa Sa shares actually closed up 2.58 per cent at HK$ 2.78 on Thursday, after it proposed a final dividend of 9.0 HK cents, and a special dividend of 5.5 HK cents per share.

But Au said he did not expect the dividend-driven price rise to continue.

“You may see it retreat again on Friday, because it will be hard to improve its core business,” he added.