Giordano expands brand to developing markets as part of growth strategy

Giordano has seen the group sales for the first half of 2021 rake in HK$1,681 million compared to same period of 2020’s HK$1,413 million, representing an increase of 19.0% and due primarily to improved sales on the back of last year’s low base. Gross margin grew by 2.4% to 57.0%, which the group attributed to fewer discounts. Meanwhile, its operating expense recorded a decrease of 2.9%, and was 54.1% of sales.

According to the group, online business and emerging market expansion are some of the opportunities it has spotted moving forward. Sales contribution from online platforms is gradually increasing, with online sales accounting for more than 30% of the total revenue in Mainland China and South Korea.

It added that markets the brand has a presence in have made significant strides in growing online sales since 2020, which accelerated during the first half of 2021. There are now nine franchised stores operating in Africa, which is nearly doubled YOY.

Moreover, Giordano said the brand has generally fared better in developing economies than developed economies.

Group sales further rebounded and increased by 19.0% despite a reduction of 4.3% in the total number of stores. According to the group, the year-on-year sales increase was more significant in the second quarter increasing by 44.0%, than the first quarter which increased by 2.4%, primarily due to sales improvement on the back of the previous year’s low base following the outbreak of the Covid-19 pandemic.

The sales from the Group’s online business have continued to grow, up by 21.6%. It contributed 10.1% to Group sales (2020: 9.8%), of which non-Mainland China platforms exceeded expectation with a 41.9% increase. Wholesale to franchisees recovered and recorded a rise of 21.1% owing to the store reopening after the relaxation of movement controls and social distancing measures, as well as new stores in emerging markets.

“Growth by franchising will be our expansion strategy in new markets. We will search for better store locations with realistic rental arrangements in our existing markets, especially in HK and Macau, where the once extraordinary tourist traffic from Mainland China had prompted rentals among the highest in the world,” it said.

The team also aims to revamp merchandise plans to satisfy the post-Covid-19 consumers. “With better customer-centered product development and closer cooperation with its suppliers, we expect fewer discounts and markdowns compared with past years,” it said.

HK and Macau

HK and Macau recorded an operating loss, albeit less than the same period in the previous year. Sales increase and rental reductions were the critical factors behind the improvement, of which around half of the rental reductions were due to the closure of loss-making shops. Barring any unexpected Covid-19 outbreaks, the sales should continue to improve, said the group.

“The average rental is still high despite gloomy consumer sentiment and the absence of incoming tourists. Management is continuing to negotiate with landlords for more affordable rental arrangements,” it added

Mainland China and Taiwan

Sales in Mainland China enjoyed a double-digit rebound despite fewer stores. Online sales and the franchising business continue to be our focus of development. The online gross margin improved with increases in selling prices and fewer discounts. Franchised stores expansion resumed during the period with a net gain of 15 stores. As of June 30, 2021, more than two-thirds of the stores were franchised, and management anticipates the proportion will further increase.

For Taiwan, sales momentum had outperformed most markets until effectively being brought to a standstill in mid-May due to an unexpected outbreak of Covid-19 cases. The ensuing movement controls gravely hurt its sales. That said, the sales decrease has narrowed from July.  Although there are signs of improvements of late, the unexpected outbreak in Taiwan, which had begun in May, also disrupted the Group’s sales recovery.

“Our strong brand image and successful marketing, coupled with weakened competition, we anticipate, will help resume sales momentum after the alleviation of movement controls,” said the group.

SEA

Sales in these markets registered a double-digit growth, primarily driven by Indonesia and Singapore. However, the number of confirmed local Covid-19 cases remains high in Southeast Asia.

The protracted Covid-19 movement controls in Southeast Asian countries, and the sudden surge in Covid-19 cases, particularly in Indonesia, hampered the sales increase momentum. The protracted and strict social control measures and travel restrictions severely interrupted business in tourist areas, and to a lesser extent, in the residential areas.