Skin care and cosmetics retailer Sa Sa International Holdings Ltd on Wednesday flagged improvements in Hong Kong’s retail business as it posted a 37.3 percent plunge in first-half net profit due in part to a drop in mainland tourist numbers.
The company’s shares jumped more than 5 percent despite its worst first-half profit in eight years, after Chairman Simon Kwok hinted the bottom may be approaching for Hong Kong’s retail sales following 19 straight months of declines.
“The Hong Kong retail market showed gradual signs of improvement during the period. However, the market has not yet fully recovered,” Kwok said, adding the decline in sales was expected to continue to narrow in the second half.
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Sa Sa’s net profit fell to HK$96 million ($12.4 million) for the six months ended in September from HK$153 million a year ago. Revenue fell 4 percent to HK$3.63 billion from HK$3.78 billion a year earlier.
Retail sales in Hong Kong and Macau fell 3.6 percent, while gross profit margin decreased to 41.2 percent from 42.9 percent. It trimmed its overall retail network to 283 from 291.
“Profitability will continue to be impacted by strong competition and with lower gross profit margins.” — Simon Kwok
Many investors had expected worse after Sa Sa warned in October it expected half-year profit to fall as much as 45 percent due to a decline in sales and gross profit margin at its Hong Kong and Macau operations.
The company earlier said July-September quarter retail and wholesale turnover fell 2.3 pct year-on-year, narrowing from a 5.7 percent drop in previous April-June quarter.
Hong Kong’s retail sales fell for the 19th straight month in September as China’s economic slowdown and a strong local currency crimped business activity and tourism, though the rate of decline eased from the previous month.
Tourist arrivals in September slid 3 percent from a year earlier and inbound tourism spending plunged 13.6 percent in the first half of 2016, according to the Hong Kong Tourism Board.
Sa Sa shares rose 5.4 percent on Wednesday afternoon, outpacing a 0.3 percent gain in the benchmark index.
(Source: Reuters)