Retail in Asia

In Trends

Sa Sa announces financial results

Sa Sa

Sa Sa International Holdings Limited announced its final results for the year ended 31st March 2020.

SEE ALSO: Gap reports its first quarter financial results

The retail industry of Hong Kong SAR registered a significant decline in sales from mid 2019 onwards. Mainland tourists declined by 41% in the second half of 2019 in Hong Kong SAR due to the outbreak of social issues. In early 2020, the Individual Visit Scheme for Mainland Chinese visitors to Hong Kong and Macau SARs was suspended to impede the spread of the COVID-19 virus, which made it an even more challenging year for the retail sector in Hong Kong and Macau SARs.

During the financial year, the group’s turnover decreased by 29.9% to US$737.7 million for the continuing operations due to the aforementioned reasons. Loss for the year amounted to US$66.57million, compared to a profit of US$60.75 million in the same period last year. Excluding the provision for impairment of US$34.9 million made in accordance with the Hong Kong Accounting Standard 36 that applies to retail store assets (including right-of-use assets and property, plant and equipment) and a loss of HK$40.8 million for the termination of retail business in Singapore, the group’s loss was US$26.4 million in this financial year.

Basic loss per share amounted to US$2.15 cents. In view of the challenging and uncertain operational environment, the Board does not propose a final dividend.

In Hong Kong and Macau SARs, retail sales dropped by 34.6%, while same store sales declined by 33.8% for the year ended 31st March 2020. The overall number of transactions decreased by 26.3%, with the number of Mainland tourists and locals declining by 45.3% and 2.2% respectively. Local consumption declined less by comparison, mainly due to the group’s quick shift of product sourcing towards personal protection equipment. In addition, the Group has actively strengthened online channels to capture some of the lost sales.

In the face of the challenging operational environment, the group closed poor performing stores in tourist areas to reduce costs and arrive at a leaner cost structure. The group had already closed 12 stores from 1st October 2019 to 14th June 2020, with the majority of these located in the tourist districts of Tsim Sha Tsui, Causeway Bay and Mongkok. Staff costs were reduced through no pay leave arrangements, a temporary salary reduction scheme and adjustment of staff organisation, while members of staff have also been encouraged to clear their annual leave. In addition, the inventory reduction efforts through clearance sales and wholesale measures have reduced the Group’s inventory by HK$407.8 million to HK$1,005.9 million.

During the financial year, total turnover for the group’s Mainland China operations decreased by 12.1% in local currency to US$31.35 million, while same store sales in local currency terms rose by 5.2%. Due to the COVID-19 outbreak, the group closed most retail shops in Mainland China temporarily from late January to mid February. 90% of shops have re-opened since mid March 2020 and sales are gradually improving, with the same store sales in May climbing to a similar level as the same period last year.

In this financial year, the turnover of the e-commerce business was HK$344.7 million, with around 90% of customers coming from Mainland China. Sales generated from third-party platforms grew by 4.6% year-on-year. Sales contribution of third-party platforms increased to 70% in the financial year as TMall and JD.com reported sales growth, offsetting the significant sales decline at Kaola. Due to the relentless shift of consumer traffic towards third party platforms, the group has closed its own website and mobile app for the Mainland China market and directed customers to the WeChat mini- programme piloted in October last year. The WeChat mini-programme is a natural online extension of the personal services traditionally provided by beauty consultants in the physical stores. It offers the advantages of multiple touch point consultant services and sales irrespective of the location of customers. It also provides compensation for lost income for the frontline staff who are otherwise suffering badly from the lack of footstep traffic in the physical stores. The sales focus, gross margin and basket sizes are more satisfactory as compared to pure online sales due to the personal service element.

The group is increasingly coordinating the online and offline operations to serve customers due to the change in consumer behaviour towards online purchases, all of which has been hastened by the COVID-19 pandemic. In an initiative specifically aimed at serving local consumers in Hong Kong SAR, in early March 2020 the Group began partnering with a service provider to provide support for an online queuing system for sale of surgical masks. This has proved to be very well received and has the added advantage of increasing new member recruitment.

For the 10 months ended January 2020, the group recorded double-digit sales growth, and increased profit in the Malaysia market by a high single digit year-on-year. Mandatory temporary shop closures were implemented under the Movement Control Order in mid March as a result of the COVID-19 outbreak, which seriously disrupted sales performance in the fourth quarter, trimming overall annual sales growth to 3.6% in local currency terms.

Turnover of the Group in Malaysia was HK$390.2 million, while a profit of HK$16.2 million was recorded for the whole financial year. With the gradual re-opening of retail shops in May, local sales performance has already begun to recover.

SEE ALSO : Sa Sa announces sales report for FY 2019/2020

Singapore had been loss making for many years. As a consequence, the group closed all 22 stores in the financial year, thereby concentrating its resources on markets in Hong Kong and Macau SARs, Mainland China and Malaysia, as well as the e-commerce business