Plummeting sales and write-downs have led Hong Kong-headquartered beauty-products retailer Sa Sa International to warn of a loss of up to US$38 million in the September half year.
“The global Covid outbreak has affected the operation of all of the group’s physical stores including its businesses in Hong Kong, Macau, Mainland China and Malaysia,” chairman and CEO Simon Kwok said in a note to shareholders on Friday.
While cross-border visitor numbers now almost nil in most markets, sales through Sasa stores to local customers were weak for most of the period due to social-distancing requirements.
“As a result, both the footfall and retail sales at the group’s stores in those markets have fallen sharply. Retail consumption has been very weak,” he said.
While final results will not be released until late this month, Sa Sa expects a trading loss of and impairments to range between HK$230 million and $300 million, compared to a profit in the same period a year earlier of $35.5 million (US$4.6 million).
The impairment has arisen from the drastic decline in sales at the group’s retail stores, especially those in Hong Kong’s tourist districts, amid the Covid-19 pandemic.
However, the group’s cash and bank balances of around HK$590 million as at September 30 are adequate to meet its current business needs.
Sa Sa has reduced the number of stores in tourist areas, negotiated rent reductions and strengthened its category management to mitigate the decline in customers, along with reducing inventory and managing costs.
“In addition, the group has accelerated its adaptation to the new retail era by actively developing its e-commerce and online-to-offline (O2O) businesses,” said Kwok.