S Culture posts a loss

Footwear retail S Culture has, as expected, posted a loss for the first half year and says all its store in the territory are under constant review.

S Culture sells shoes under the Clarks, Josef Seibel, Petite Jolie and The Flexx retail brands in Hong Kong, Mainland China and Taiwan. It flagged a looming loss in a profit warning issued in early July.

It has announced that group revenue slipped 8.6 per cent to HK$245.9 million. Same store retail sales fell 8.2 per cent (compared with a 15.2 per cent increase in the same period the previous year), mainly due to “the prolonged sluggishness of the consumer market in Hong Kong”, resulting from the declining spending sentiments of the local consumers and tourists from the Mainland China.

While it is growing its business in the Mainland, the majority of its sales are in Hong Kong where it has 73 retail stores. Sales there fell 9.6 per cent in the half.

The company says to counter the high costs of operations and falling sales, it is stalling its salary increment plan this year and “rebalancing” its retail outlets mix by monitoring the effectiveness and productivity of each store on a regular basis.

“We were also considering to close those under-performing retail outlets or to relocate certain retail outlets to other prime shopping locations with lower rentals. In this regard, we continued our best endeavours to contain the operating expenses at a stable and reasonable level with respect to the sales made and to respond promptly to the ever-changing market conditions.”

In Taiwan, the group increased the number of its retail outlets in Taiwan to 51 during the period. Excluding the effect of exchange rates, revenue generated from Taiwan rose 1.5 per cent.

“We continued with our strategy in Taiwan by identifying and increasing our retail outlets in selected department stores in the latter half of 2015. We also revamped our warehousing logistics arrangement and infrastructure to facilitate our product flow throughout Taiwan.”

In Mainland China, S Culture continued to implement the strategies to strengthen the business.

“Towards this goal, we continued to open our concession counters under the brands of “Josef Seibel” and “The Flexx” and actively collaborate with our local and experienced business partners to gradually expand our retail network and capture our target customers in the cities of the Mainland China.”

As at June 30, the group had two retail outlets and six points of sales of its products under the brands of “Clarks”, “Josef Seibel”, “Petite Jolie”, and “The Flexx” in the cities of Shanghai, Qinhuangdao, Haikou, Qingdao, Songyuan, Zhengzhou and Harbin.

“The management expected to record growth in both number of point of sales and sales in the Mainland China in the foreseeable future.”

S Culture said it expects the consumer market in the second half of 2015 to remain weak and uncertain.

“The lingering after-effect of Hong Kong socio-political unpleasantness and the local protests in Hong Kong towards the Mainland Chinese tourists painted a cloudy prospect to the retail sector in Hong Kong. The deterioration in the macroeconomic environment and the ever-changing consumer behaviors exerted pressure on the general retailers as a result of weak retail sentiment. We foresee enormous challenges ahead for the traditional brick and mortar retail sector as a whole in our areas of operation.”

The company says it will maintain “a conservative outlook towards the Hong Kong retail market” in the second half year.

“In this regard, management will pursue precise operating tactics to rationalise its retail network and to monitor its costs of operations. The group is keen and cautious to identify suitable target locations and cities to expand our scale of operations in the Mainland China. Aside from operating under physical retail outlets, the group will also explore new business opportunities and initiatives such as viable online sales platforms and marketing channels to increase our market share in the Mainland China. We anticipate that the embarking on omni-retailing channel can help us to unearth potential opportunities and growth areas there.”

While it expects a “less promising” full year result this year compared to last, the company believes the “current sluggishness of the retail sector” is only temporary.

“We are confident the group’s solid foundation in its abundance of experience and exclusivity of branded footwear distributorship, dedication in pursuing excellence in product and service quality and active promotion of sustainable business development strategies shall guide the group to cut through the challenges and seize the opportunities during market recovery in the foreseeable future.”

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