Bauhaus posts loss as margins squeezed

Fashion retailer Bauhaus has reported a net loss of HK$26.6 million for the first half year after sales tumbled in key markets.

In Taiwan, where it has 95 stores and counters, stagnant retail sentiment and weak consumption presented great challenges, with same-store sales tumbling 18 per cent.

In Mainland China, where the group has self-managed shops in Beijing, Shanghai, Guangzhou, Nanjing and Suzhou and a franchise network focusing on the second-tier cities, turnover dropped by 4.9 per cent to about $58.4 million and same store sales slipped two per cent.

And in Hong Kong and Macau, same store sales declined by seven per cent in the first half year.The two territories account for about 73 per cent of the locally listed company’s sales through 90 stores, less than half its total network of 228.

The group’s turnover is mostly from its major in-house labels like Salad, Tough and 80/20, and licensed brands including Superdry.

Bauhaus opened seven new stores in  in Hong Kong and Macau in the six months to September 30 as it “continued to enrich its shop portfolio to be more attractive, efficient and competitive”.

“However, retail performance in many sectors across the region deteriorated, possibly due to less spending from both inbound tourists and local citizens as a result of the growth slowdown in Mainland China, strong local currency and volatile finance markets. In addition, the operating costs in the region still remained high in general, particularly rentals, further cutting profit margin of the retailers.”

Profit before tax in the two territories dropped by 57.2 per cent to about HK$24.1 million (compared with $56.3 million in the same period last year).

Bauhaus said in its half yearly results filing that gross profit across the whole business decreased by about 11.1 per cent to $353.9 million, with gross margin declining by two percentage points to about 60.5 per cent.

“Global economic performance was weaker than expected during the six months. The slowdown of growth in Mainland China together with the strengthening US dollar, which in turn resulted in a strong Hong Kong dollar against most Asian currencies, gradually had an obvious negative impact on inbound tourism and local retail consumption,” the company said.

However, the group says its sales and results are greatly affected by seasonality, with the first half of the year traditionally less important than the second.