Giordano group sales fell 11.9 percent last year to HK$4.852 billion (US$624.6 million).
Sales from physical stores fell by 9.6 percent, while sales to franchisees declined by 24.2 percent, partly due to the tightening of the company’s credit policy in light of weakening economic conditions.
Excluding the impact of a change in accounting standards to allow a direct comparison of year-on-year results, Giordano would have recorded a profit for the year of HK$289 million ($37 million) for the year, down 39.8 percent. But the group’s gross margin slipped by just 0.3 percent to 58.7 percent.
In a stock-exchange filing, the company said multiple factors including the Sino-US trade war, social unrest in Hong Kong, and an unseasonably warm winter impacted on sales by dampening consumer sentiment. The worst-hit markets were Hong Kong and Mainland China.
One of Giordano’s biggest challenges was its e-commerce business on the mainland, where sales dropped 15 percent to HK$267 million ($34.4 million) due to “ferocious competition on established third-party platforms”.
But e-commerce in other regions recorded strong growth. In Hong Kong “substantial growth” was achieved as the group launched on local third-party platforms such as HKTV Mall.
“Management is determined to further develop our e-commerce business in all regions by improving the product mix and collaboration with emerging online platforms, the company said.
In the year ahead, Giordano plans to expand its global footprint. Four franchised stores opened in Mauritius in the second half of last year and this year the company plans openings in India and Kenya. The Middle East and Indonesia businesses recorded sales growth last year, making them “critical markets” for short-term expansion.
Meanwhile, the company expects the coronavirus outbreak to affect its business “significantly” in the first quarter of this year. “Nevertheless, with a secure brand positioning and quality merchandise, management is confident of overcoming the challenges ahead. Management will further strengthen the group’s financial position through a combination of strategies and actions.”
The group plans a more cautious approach in Mainland China and Hong Kong this year and will instead focus on overseas markets, especially the Middle East and developing markets in Southeast Asia – Vietnam and Indonesia.