Giordano to downsize HK operations

Hong Kong-based apparel company Giordano is planning to temporarily downsize its operations in the city due to the ongoing pandemic and the loss-making business in both Hong Kong and Macau. This comes despite the business of the entire group improving last year. 

The company's income in the Hong Kong and Macau markets was HK$355 million (US$45.37 million) for the year ended on 31 December 2021, down from HK$362 million (US$46.26 million) in 2020. The comparable stores’ sales grew by 8.7%, which mitigated the drop in total sales owing to the year-on-year store reduction from 62 to 51. Hong Kong and Macau recorded an operating loss, albeit significantly less than the previous year. The improved performance was primarily due to the closure of loss-making shops and some rental reductions.

However, Giordano said rental expenses in Hong Kong and Macau remained too high for the current challenging operating environment. The online business performed better than offline. Online sales increased by 29% year-on-year, primarily through the growth of third-party platform sales.

In China, the company's sales grew from HK$701 million (US$89.58 million) in 2020 to HK$715 million (US$91.37 million). The company said business in China recorded mild sales growth despite a reduction in store numbers The growth momentum was steady in the first three quarters in 2021 until the new wave of the pandemic in Mainland China during Q4. Mainland China’s online sales grew by 12 8%, contributing around 40% to total sales (2020: 36%)

Taiwan reported a year-on-year double-digit sales drop due to strict movement controls commenced in mid-May and continued until Q4. The company expected that the pandemic will continue to hinder its sales by advancing conservative buying sentiment.

The group's sales rose by 8.3% to HK$3,380 million last year (US$434.53 million; 2020: HK$3,122 million, US$401.36 million), with gross profit advancing by 11.2% due to a 1.5 percentage point rise in gross margin and group-wide sales increases. The group’s online sales surged by 25.5%, contributing 12.1% (2020: 10.5%) to total sales. Net profit for 2021 was HK$190 million (US$24.28 million). In 2020, its net loss was HK$112 million (US$14.31 million).

Peter Lau, CEO of Giordano said, "The business environment in 2022 will remain volatile, especially in Greater China. At the time of writing, the Omicron variant outbreak severely hurt sales in Hong Kong, and we do not expect the situation to improve for the most part of the year."

"The group will temporarily downsize the Hong Kong operations until there are clear and positive signs of economic recovery. Additionally, the global supply chain disruption presents another challenge. The Group has taken measures to address the difficulties, quickly moving to regional sourcing. We are well poised to resolve the problem leveraging our regional management and connections," he added.

Looking ahead, Lau said the group was successfully partnering with locally robust third-party platforms when it comes to eCommerce. For Mainland China and South Korea, where its eCommerce has been long-established, online sales contribution increased to nearly 40% of total sales with decent profitability. Lau added that newly developed online businesses elsewhere in the group’s markets were growing at a steady pace too.

Speaking of the brand's image, Lau said the group was determined to move away from the budget brand perception. Its efforts towards upgrading the Giordano brands were continuing with encouraging results, evidenced by higher selling prices and gross margins.

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