Joyce Boutique plunges into the red
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Listed fashion boutique operator Joyce Boutique says it will continue to take a cautious approach to business expansion and focus on consolidation of the Joyce multi-label business towards higher-productivity stores in the year ahead.
It will renovate and expand the Joyce flagship store in Central and relocate the Shanghai Joyce flagship store to a bigger space within Plaza 66 to introduce a completely new look and unique shopping experience to customers.
The move follows revelation of a HK$34.9 million half year loss for the company – a major turnaround from the $32.8 million profit in the same period last year.
Sales slumped 10.9 per cent, and gross margin lost 3.5 percentage points, the company has reported to the stock exchange.
“The persistent fall-off in customer spending on luxury goods in Hong Kong and Mainland China drove down the sales performance of the luxury retail market in the period. Depreciation of the euro and yen against the dollar and renminbi led to an increase in overseas shopping and online shopping for luxury goods and impacted on bricks-and-mortar local retailing.” the company said in its interim report.
Joyce Boutique’s Hong Kong, turnover dropped by 10.3 per cent against the same period last year and accounted for 82.5 per cent of group turnover (2014: 81.9 per cent). Further impacted by declined gross margin and increased rental costs, the Hong Kong division incurred an operating loss of $12.6 million for the period (2014: a profit of $36.6 million).
“Sales slumped 10.9 per cent, and gross margin lost 3.5 percentage points, the company has reported to the stock exchange.”
Mainland China turnover declined by 14.6 per cent versus the same period last year and operating results turned into a loss of $22.9 million from last year’s profit of $3.1 million, chiefly the result of a general decline in turnover and margin and an additional $7.6 million provision made for a loss making shop in Shanghai.
The joint venture with Marni made a loss contribution of $1.0 million (2014: profit of HK$1.3 million) due to a drop in turnover and an increase in operating costs.
“In view of the difficult trading environment, the group adopted a cautious shop strategy. While opening new shops for three potential brands as planned in the previous financial year (the first Hong Kong shop for Thom Browne at On Lan St, the first China shop for Sacai at Beijing Sanlitun and the first Macau shop for Alexander Wang at Galaxy Macau), the group closed certain non-performing shops to improve shop productivity,” the company reported.
As well as the change in store focus and the renovation of the Hong Kong and Shanghai flagships, the company says it plans to further strengthen customer loyalty and drive sales from VIP customers through enhanced personal stylist services and the introduction of private customer mobile apps.
Joyce Boutique says it expects the near term trading environment will remain “tough and challenging”.
“Rental levels in prime shopping malls remain high relative to turnover. Online shopping and overseas shopping for luxury goods will continue to impact on bricks-and-mortar specialty retailing. In view of the challenges, the group will focus on driving cost efficiency and shop productivity, fashion editing and reducing business risks through taking cautious approach to business expansion and stock purchase planning.”
Questions & Answers
Q.What is Joyce Boutique's main strategy for the year ahead to address its recent losses?
What is Joyce Boutique's main strategy for the year ahead to address its recent losses?
Joyce Boutique plans to continue a cautious approach to business expansion and consolidate its multi-label business towards higher-productivity stores. They will also renovate and expand flagship stores and focus on cost efficiency.
Q.What factors did Joyce Boutique identify as contributing to the fall in sales and profits?
What factors did Joyce Boutique identify as contributing to the fall in sales and profits?
Persistent falls in customer spending on luxury goods in Hong Kong and Mainland China, combined with increased overseas and online shopping due to euro and yen depreciation, drove down sales. Increased rental costs and declined gross margin also impacted profits.
Q.How did the Hong Kong and Mainland China divisions contribute to the company's overall loss?
How did the Hong Kong and Mainland China divisions contribute to the company's overall loss?
The Hong Kong division incurred an operating loss of HK$12.6 million, reversing a previous profit, primarily due to dropped turnover, declined gross margin, and increased rental costs. Mainland China operating results turned into a HK$22.9 million loss.
Q.Beyond store consolidation, what other initiatives is Joyce Boutique undertaking to improve performance?
Beyond store consolidation, what other initiatives is Joyce Boutique undertaking to improve performance?
The company plans to strengthen customer loyalty and drive sales from VIP customers through enhanced personal stylist services and introducing private customer mobile apps. They are also focusing on fashion editing and reducing business risks.
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