An unseasonably warm winter and weak consumer sentiment in core markets has been blamed for a more than doubling of losses for Bossini International in the six months to December. The casual-fashion retailer reported a 10 per cent decline in group revenue to HK$875 million (US$111.5 million) and a 5 per cent drop in same-store sales for the period. Gross profit fell 11 per cent and the loss attributable to shareholders ballooned from $12 million in the same period a year earlier to $26 million (US$3.3 million).
Operating profit in the key Hong Kong and Macau market, where Bossini has 39 stores, improved, despite a 5 per cent decline in same-store sales.
In Singapore, sales plummeted 23 per cent due to store closures. Same-store sales there fell by 6 per cent, in Taiwan by 7 per cent and in Mainland China by 3 per cent. Group-wide same-store sales fell by 5 per cent, worse than the 2 per cent of the December 2017 half.
As at the end of last year, Bossini International had a total net retail floor area for directly managed stores of 362,000sqft, about 4000sqft less than a year earlier, across 295 stores, (11 more than a year earlier). It opened 114 franchised stores in markets outside Hong Kong and Macau, taking the total franchised network to 768.
Hong Kong challenge
Bossini chairman Man Kuen Bess Tsin said the significant decline in retail sales growth in Hong Kong since July and the negative impact of the devaluation of the Renminbi had impacted on the company’s sales in its home market, which accounts for 66 per cent of group revenue.
“The Hong Kong retail market presented a cautious optimism if not a mixed picture. Strong inbound tourism, especially from Mainland China, was recorded in Hong Kong. Nevertheless, the consumption per capita started to drop in the third quarter, despite the annually increasing numbers of tourist arrivals in Hong Kong.”
The group’s total net retail floor area in Hong Kong and Macau reduced from 125,800sqft to 121,600sqft, a decrease of 3 per cent, while sales per square foot slipped 5 per cent to $7200 (from $7600). Operating profit in Hong Kong and Macau was $17 million, up from $12 million for an operating margin of 3 per cent (compared with 2 per cent a year earlier).
Mainland China revenue decreased 2 per cent.
Bossini Singapore posted an operating loss of 5 million, 20 per cent more than the comparable period and the operating margin was negative 9 per cent.
Cautious outlook
Tsin said Bossini International management is “cautiously optimistic” about the year ahead.
“However, in face of the complex and volatile global economy and geopolitics, the outlook is full of uncertainties. As an open economy, Hong Kong is particularly vulnerable to the impact of the global situation. At the same time, the local economy and consumption structure are also gradually changing.
Challenges and opportunities coexist. The group is fundamentally strong with a healthy financial position, which is capable of facing the potential challenges.”
Tsin said the export franchising business is a main focus of the group.
“We will further expand and optimise the distribution network, leveraging the economy of scale in market reach and profitability.”
The company will focus on introducing more new products and designs, with a focus on functionality at the core of its product strategy. Alongside the young adult segment, the company will develop more childrenswear lines to broaden its customer base and it will strengthen supply chain management to improve operational efficiencies.