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Sales, profit ease for Giordano International

(Source: Inside Retail Philippines | 11 November 2016)

A new Mainland China focus is paying off for fast-fashion retailer Giordano.

A slight downward turn for sales and profit has been recorded by apparel retailer Giordano International in its unaudited update for its third quarter.

Consolidated group sales for the period, to September 30, eased 3 per cent to HK$1197 million (US$154 million). Group comparable store sales decreased by the same percentage. Giordano says early religious holidays in some markets shifted peak sales month from July to June this year.

The group’s consolidated gross profit also decreased by 3 per cent while the gross profit margin improved by 0.3 points to 58.3 per cent, thanks to lower material costs of supplies based in renminbi, and changes in product mix.

As well as third-party brands under licence, the group’s family of brands include Giordano & Giordano Junior, Giordano Ladies and BSX. It has 2388 stores in more than 30 countries, of which 1155 are standalone stores. Most stores are in China, South Korea, Southeast Asia and the Middle East.

Giordano says its geographic expansion focus has been on third- and fourth-tier cities in China and Southeast Asia, where its retail floor space grew 7 per cent in the past 12 months.

In Greater China, closure of non-performing stores, unstable weather and less promotion from a key online platform resulted in a sales decline of 6 per cent, says the group.

Growth momentum

Hong Kong continued its growth momentum despite the retail environment still being tough, while Taiwan’s performance has weakened since the change in government. Revenue was also affected by a drop in tourist numbers, especially from China, and unstable weather.

Sales grew by 7 per cent in the rest of Asia Pacific, but this would have been 3 per cent when translated at constant exchange rates. This was primarily driven by a strong growth in Thailand that offset declines in regions impacted by the different Ramadan timing. Thailand’s growth was a result of demand for mourning-coloured merchandise to mark the death of the Thai king.

Within the core Giordano brand, 77 per cent of sales came from menswear with the balance from womenswear. However, premium womenswear brand Giordano Ladies outperformed the group’s other brands. During the quarter the group opened three Giordano Ladies stores, two of them in Southeast Asia.

In Australia, Giordano restructured its product mix and team, but management continues to assess if the market fits the group’s geographic strategy.

Warmer weather in South Korea adversely affected sales. The market is a 48.5 per cent JV with an independent management team. Wholesale sales for the quarter fell by 11 per cent to HK$82 million.

Elsewhere, the Philippines, Myanmar and Vietnam reported double-digit expansion of retail space over the past 12 months, with an 11 per boost in wholesale sales in the third quarter.

 

 

 

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