WHAT THE BROKER SAYS

Clothing retailer Giordano is facing its brightest prospects for several years and is forecast to deliver a strong performance in 2004.

G K Goh has upgraded its recommendation on the company from ''sell'' to ''buy'' and raised its target price to HK$6 from $4.925 on March 19. The counter closed at $5 on Friday.

Net profit last year was down 22 per cent year on year to $266 million, which was better than expected. The group turned around strongly in the second half on a combination of improved merchandising and better consumer sentiment.

The Taiwan market, a four-year problem for Giordano, has been recovering strongly since October because of stronger merchandising and the relocation of stores.

Better procurement and inventory management helped to lift the gross margin from 46.7 per cent in 2002 to 48.2 per cent last year. Operating costs declined by 4 per cent year on year because of a 7 per cent drop in staff expenses and savings in the company's distribution and administration.

Sales in Hong Kong and Taiwan were encouraging in the fourth quarter last year and Goh believes the momentum will probably continue in 2004.

January and February sales increased by double digits over the previous year's levels. The broker has raised its earning estimates to $390 million for this year and $452 million next.