2014 Annual Results - Giordanocorp.giordano.com.hk/files/results_material/... · 1Q13 2Q13 3Q13...

2 0 1 4 A n n u a l R e s u l t s

3 March 2015

3 March 2015 Giordano 2014 Annual Results 2

Overview of 2014 Results Adjusted for currency, sales reduced by 3%. Global Brand Sales reduced by 4%.

Sales improved in second half in Greater China and 4Q in SEA but weak demand in Middle East and Korea.

Second half sales trend continue into Jan-Feb with double digit same store sales growth in Greater China, Singapore and Thailand with partly offset by decline in South Korea and UAE.

GP % reduced by 2.7pp to 58.0%. GP% decline narrowed in second half.

PATS reduced by 38%. Second half declined by 28% compared to a decline of 49% in first half.

Inventory turnover days down 2 days to 80 days, higher than anticipated but will be rectified due to improved results in CNY.

Final dividend @ 14.5 HK cents. Full Year Dividend 25.0 HK cents (96% payout ratio), reflecting the Group’s strong cash position and balance sheet.


Sales Growth and Contribution by Region Gradual recovery in Greater China and SEA. ME still a challenge.

304 (5%) 346 (6%)

632 (11%) 617 (11%)

1,460 (25%) 1,362 (25%)

1,725 (29%) 1,640 (30%)

1,727 (30%) 1,580 (28%)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2013 2014

(HK$ millions)

Mainland China

Hong Kong & Taiwan

Rest of Asia Pacific

Middle East

Wholesale sales to overseas & others

5,848 5,545

Mainland China 9% / 8%*

Hong Kong & Taiwan 5% / 4%*

Rest of Asia Pacific 7% / 1%*

% to group sales in brackets

* Sales growth excludes exchange effects

Wholesale sales to overseas & others 14%

Middle East 2%

1H 2H

-6% -4%

-1% -2%

-1%

-3%

-6%

-2%

-6%

-4%

3%

-2% -2% -2%

-2%

-6%

-2%

-6%

-1%

8%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15

Total Brand Sales Growth Comp Store Brand Sales Growth


Brand Sales Growth for the last 8 quarters 4Q sales improved. CNY 2015 showed sign of recovery.

2014 2013 Variance

Global brand sales (HK$ millions) 7,479 7,821 (4.4%)

Comparable store sales growth -4% -2%

-12% -13%

-10%

-13% -15%

-6% -7%

-10%

4%

-7% -8%

-5%

-8% -10%

1% 1% 1%

16%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15



Brand Sales Growth by quarter – Mainland China Positive same store sales in second half. Encouraging sales growth in CNY.

Full year (14 vs 13)

Brand sales ↓10%

Brand comp store sales ↓2%


Mainland China Sales Trend vs Market

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%(YOY growth)

PRC apparel retail sales

Giordano comp store sales

Year 2013 Year 2014

YOY FY 2013 FY 2014

PRC apparel +12% +11%

Gio CCS -7% -2% Data source: National Bureau of Statistics of China – Retail Sales of Enterprises above Designated Size (Garments)

4%

0% 0%

2%

-8%

-4%

-6% -7%

5%

3% 1% 0%

2%

-7%

-4% -5%

-3%

10%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15



Brand Sales Growth by quarter – Hong Kong Tough environment in 2014. Merchandise will change to adapt to market.


Brand sales ↓6%



Hong Kong Sales Trend vs Market

-20%

-15%

-10%

-5%

0%

5%

10%

15%

(YOY growth)

HK retail sales - wearing apparel

Giordano comp store sales (ex-Macau)

Year 2013 Year 2014

YOY FY14 FY13

HK apparel retail sales value +4% +8%

Giordano CSS (ex-Macau) -5% +1%

-15%

4%

-7%

-3%

-11%

1%

3% 4%

17%

-14%

6%

-3%

1%

-10%

3%

6% 5%

20%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15



Brand Sales Growth by quarter – Taiwan Positive response to locally designed and marketing products.


Brand sales ↓1%

Brand comp store sales ↑1%


Brand Sales Growth by quarter – Rest of Asia Pacific Volatile in SEA. Gradual pick up since 4Q.


Brand sales ↓2%


13%

4% 6%

1%

-6%

0%

-4%

3%

11%

8%

3% 3%

0%

-11%

-8% -9%

2%

10%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15


SMIT: SG -3% ID +14% MY +7% TH +5%

SMIT: SG +4% ID +6% MY Flat TH -4%

SMIT: SG +9% ID +13% MY +5% TH +31%

SMIT: SG +17% ID +5% MY Flat TH +26%


Brand Sales Growth by quarter – Singapore Performance improved after re-merchandising.


Brand sales ↓11%


2%

-9%

-7%

-7%

-18%

-10%

-16%

-3%

9%

-1% -6%

-8%

-5%

-17%

-7% -12%

4%

17%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15



Brand Sales Growth by quarter – Middle East Instability resulted in volatile demand.


Brand sales ↓2%


-1%

1%

-1%

3%

10%

-1%

-8% -6%

-6% -6%

-1%

-7%

0%

4%

-6%

-9%

-6% -6%

-10%

-5%

0%

5%

10%

15%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15


KSA -12% UAE Flat OTH +1%

KSA -14% UAE +1% OTH +3%

KSA -1% UAE -12% OTH +4%

KSA -2% UAE -12% OTH +5%


Jointly Controlled Company – South Korea Intense competition and sluggish economy depressing sales.


Brand sales ↓4%


11%

0% 3% 1%

5%

0%

-11% -8%

-14%

4%

-6% -4%

-1%

4%

-1%

-13%

-8%

-14%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Jan & Feb15


Australia 25 outlets; -7

Bahrain 5 outlets; +1

Armenia 3 outlets

Brunei 2 outlets

Lebanon 2 outlets

Canada 1 outlet Georgia

11 outlets

Hong Kong & Macau 79 outlets; -9

India 56 outlets; -9

Indonesia 203 outlets; +24

Iran 11 outlets; +4

Saudi Arabia 95 outlets; -4

Pakistan 5 outlets; +3

Kuwait 11 outlets

Mainland China 961 outlets; -200

Malaysia 92 outlets; +5

Myanmar 117 outlets; +8

Oman 3 outlets

Philippines 71 outlets; +9

Qatar 6 outlets

Singapore 49 outlets; -3

South Korea 219 outlets; -25

Taiwan 199 outlets; -2

Thailand 142 outlets; +9

U.A.E. 45 outlets; +1

Vietnam 21 outlets; +6

Worldwide total: 2,452 as at 31 December 2014

Yemen 2 outlets; +1

Nepal 1 outlet

Japan 6 outlets;-4

Aruba 3 outlets; -2

Sri Lanka 4 outlets; +1

Global Retail Network Mongolia

1 outlet; +1

Cambodia 1 outlet; +1



Gross Profit Reconciliation Increased cost due to product mix & currency depreciation. Weak CNY, store closure drove volume down.

3,551 (60.7%)

(132) (42)

64

(169)

9

(67)

3,214 (58.0%)

0

500

1000

1500

2000

2500

3000

3500

4000

2013Gross profit

Increase inmerchandise

cost

Currencydepreciation

loss on purchase

Priceincrease

Volumedecrease

Stock provision Exchangedifference

2014Gross profit

(HK$M) Average cost

7% Volume 1Q 2Q 3Q 4Q

14 vs 13 -11.8% -0.3% -3.2% -1.5%

Volume 4%

Average price 1%

↓337m (2.7pp)

1H 2H

3.5pp 2.0pp

2,836

48%

of sales

15 (1%)

11 (3%)

(52) (6%)

(9) (7%)

-

(52)

2,749

50% of sales

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2013Total OPEX

ShopOccupancy

Charges

Other ShopOverhead

Staff Costs(shop &office)

Advertising &Marketing

OtherOperatingExpenses

ExchangeDifference

2014Total OPEX

(HK$M)


Total Operating Expenses Reconciliation OPEX down 3%. Increased rent and depreciation offset by strong cost controls.

-87m (3%)

Total headcounts 2% Average salaries 4% Shop headcounts/sq.ft. 6%

Shop area 4% Rent/sq.ft. 2%


PATS Reconciliation Excluding currency, PATS down 29%. rrency impact, PATS down 29%

663

0

100

200

300

400

500

600

700

2013PATS

Decrease inprofit fromHong Kong

Decrease inprofit fromMainland

China

Decrease inprofits fromRest of Asia

Pacific

Decrease inprofits fromMiddle East

Decrease inprofits from

Taiwan

Increase inwholesale

Tax, JCE, NCI &corporatefunction

2014 PATS(excludecurrencyimpact)

Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

(53)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

(53) (44)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

(53) (44) (17)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

(53) (44) (17) (12)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(69)

(53) (44) (17) (12)

7

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

663

(70)

(53) (44) (17) (11)

7

(4)

471 ↓29% 408

38%

(63)

0

100

200

300

400

500

600

700

2013PATS



China


Pacific



Taiwan




Currencyimpact on

incomestatement

2014PATS

(HK$M)

Singapore: ↓30m

1H 2H

-49% -28%

612

148

(131)

(33) (11) (26)

(160)

399

0

100

200

300

400

500

600

700

800

EBIT Depreciation &amortization

CAPEX lessdisposal

Share of profit ofJCE/Assoc (net of

dividend)

Changes inworkingcapital

Others Tax paid Free cash flowfrom operations

(HK$M)


EBIT and Free Cash Flow from Operations Free cash flow relatively strong. Under expected sales of jackets and e-sales on “Singles Day” resulted in higher than expected inventory.

YTD Vs last year

Profit after tax 466 -36%

Free cash Flow 399 -33%

Conversion rate 91% +7%

Better cash flow, YTD FCC -33% vs PAT -36%


Changes in Working Capital

(In HK$ millions)

At Dec-13 Changes in

working capital

At Dec-14

Inventory 518 (4) 514

Account receivables 316 (25) 291

Other receivables 208 (32) 176

Accounts payable - merchandise (160) (7) (167)

Other payables (372) 79 (293)

510 11 521


(In HK$ millions) Dec 2014 Dec 2013

Inventory balance held by the Group 514 518

Inventory held by China AD 80 94

Finished goods at suppliers (not yet shipped) 23 27

Total system inventory 617 639

GROUP

Dec 2014 Dec 2013

Core items 17% 16%

Current season 64% 61%

81% 77%

Past seasons 19% 23%

100% 100%

Inventory Aging Analysis

Total Inventory including finished goods at suppliers

↓3%


108

156 144

115

137 148

0

20

40

60

80

100

120

140

160

180

Dec 2012 Dec 2013 Dec 2014

(HK$M) Capital Expenditure

Capital expenditure Depreciation

193 160 167

37 34

32

0

5

10

15

20

25

30

35

40

0

50

100

150

200

250

Dec 2012 Dec 2013 Dec 2014

(Days) (HK$M) Trade Payables

Trade payables Days Purchases Outstanding

361 316 291

38 40

33

0

5

10

15

20

25

30

35

40

45

0

50

100

150

200

250

300

350

400

Dec 2012 Dec 2013 Dec 2014

(Days) (HK$M) Trade Receivables

Trade receivables Days Sales Outstanding

Total Inventory


Change in Net Cash and Bank Balances

1,105

399

(579)

11 2

(23)

915

0

200

400

600

800

1000

1200

1400

1600

Net cash & bankbalances on31 Dec 2013

Free Cash Flowfrom

Operations

Dividend paidto shareholders

& NCI

Proceeds fromissuance of new

shares

Capital injectionfrom NCI

Exchangedifference onopening netcash & bank

balances

Net cash & bankbalances on31 Dec 2014

(HK$M)


2014 Final Dividend Dividend at 25.0 HK cents, reflecting strong cash position

(In HK cents) Net cash (HK$ millions)

DPS[1]

(HK cents)

EPS (HK cents)

Payout Ratio

Dividend yield

on full year average share price[2]

on current share price

2014 915 25.0 26.0 96% 5.4% 7%

2013 1,105 40.0 42.6 94% 5%

26.5 26.5 21.5

9.5 16.0

27.0 38.0 40.0 40.0

25.0

96%

192%

109%

46%

83% 75% 79%

87% 94% 96%

0%

40%

80%

120%

160%

200%

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(%) (HK cents)

Dividend Per SharePayout Ratio

[1] Includes interim dividend of 10.5 HK cents and final dividend of 14.5 HK cents (2013: interim 16.0 HK cents; final 24.0 HK cents)

[2] Calculated on full-year average share price (2014: HK$4.64; 2013: HK$7.45)

Book close date: June 1-3, 2015 / Dividend payment date: on or about Jun 26, 2015

Outlook And

Strategy


Group Outlook and Strategies

Execute 5Rs – Right products, Right price, Right quantity, Right place, Right time.

Loss making stores will be turnaround or closed.

Strong focus on improving AD performance after disappointing performance in 2013/14.


Right merchandise in right quantity at right price to the right place (shops) at the right time

Channel strategies

• Reduce low image C shops in China (from 358 to 162)

• Upgrade other key stores through renovation

• Cautious in opening & closing shops

Operations • Store Positioning

System (“SPS”) : focused stock allocation based on shops’ characteristics

Multi-brand strategies

5R as Culture


5R- Multi-Brand Strategies

•FOB cost reduction •Key product drivers: S/S: Short, Print T & Polo; F/W: Sweater, light weight jacket

•Reposition to “Modern Basic” •FOB cost reduction •Competitive ASP to drive volume

Greater China only •13 shops •Reshape shop format •Supply China harmonization with Giordano

•Back to Basic, source Lower FOB products •Strengthen execution in SEA

•Overall in good shape: Strengthen operation in SEA and Shanghai

Greater China only •55 shops •Strengthen operation in China

China only •Launched in Aug 2014 •8 shops in West •Experimental stage with minor direct profit


Giordano Men SS15 image pictures


Giordano Women SS15 image pictures


Beau Monde Original Shop Format

Beau Monde in Chang Chun Beau Monde in Shenzhen


Beau Monde Revised Shop Format

RT-Mart in Shanghai

RT-Mart in Chiayi, Taiwan

Signage and VM changed


Giordano Junior SS15 image pictures

2014 2015


BSX SS15 image pictures


Other initiatives

Localized fast marketing

Continue to develop the brand through localized fast marketing


Other initiatives

Store expansion

• MY, TH and ID to continue to expand store footprints to realize “first mover advantage”

Maintain strong cash flows

• Further improve inventory management process

• Receivables well managed; minimize risk for department stores in Mainland China

Fast Track Management Trainee Programme

• Currently 26 MTs

• Designed to develop managers who can take up responsibility across global operations

• Equip high quality graduates with a range of skills and experience to contribute significantly to the future of the Group

Cambodia • ↑ 1 shop in 2014

Vietnam • ↑ 6 shops in 2014

Myanmar • ↑ 8 shops in 2014

Indonesia • ↑ 24 shops in 2014

Philippines • ↑ 9 shops in 2014

Other Asia Pacific

3 March 2015 Giordano 2014 Annual Results

Q&A



Total sales[1] Comparable store sales[2]

(HK$ millions) 2014 2013 Variance 2014 2013

Mainland China 1,580 1,727 -9% -2% -6%

Hong Kong 978 1,042 -6% -5% +2%

Taiwan 662 683 -3% +1% -4%

Singapore 325 373 -13% -8% -5%

Indonesia 436 435 Flat -3% +14%

Malaysia 227 240 -5% -8% +2%

Thailand 234 241 -3% -7% +13%

Australia 113 142 -20% -4% -13%

India 25 29 -14% +1% -4%

Cambodia 2 - N/A N/A N/A

UAE 241 246 -2% -3% -2%

Saudi Arabia 325 335 -3% -7% -4%

Other Middle East regions 51 51 Flat -6% -8%

Retail & Distribution total 5,199 5,544 -6% -4% -2%

Wholesale sales to overseas & others 346 304 14%

Group total 5,545 5,848 -5% [1] Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates.

[2] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated in the prior period.

Summary of Total Sales and Comparable Store Sales Growth by Market


Number of outlets

As at 31 December 2014 As at

Dec-13 Change Giordano

& Junior Giordano

Ladies BSX Others Total

Mainland China 897 24 23 17 961 1,161 -200

Hong Kong & Macau 51 12 16 ─ 79 88 -9

Taiwan 169 15 15 ─ 199 201 -2

Singapore 45 4 ─ ─ 49 52 -3

Indonesia 159 6 ─ 38 203 179 +24

Malaysia 92 ─ ─ ─ 92 87 +5

Thailand 136 6 ─ ─ 142 133 +9

Australia 25 ─ ─ ─ 25 32 -7

India 56 ─ ─ ─ 56 65 -9

Cambodia 1 ─ ─ ─ 1 - +1

UAE 45 ─ ─ ─ 45 44 +1

Saudi Arabia 94 ─ 1 ─ 95 99 -4

Other Middle East regions 63 ─ ─ ─ 63 52 +11

South Korea 209 ─ 10 ─ 219 244 -25

Other markets 201 3 18 1 223 205 +18

Group total 2,243 70 83 56 2,452 2,642 -190

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