Le Saunda posts third consecutive loss

Hong Kong shoe retailer Le Saunda has reported yet another annual loss – this time of US$4.28 million – as a “super-cold winter” hit Hong Kong’s retail sector.

The loss followed last year’s $3.9 million, while in 2018 it lost $8.4 million. That adds up to a $16.6 million deficit for the last three years and given the tumult of the Greater China retail market in the wake of Covid-19, it is hard to see the beleaguered business returning to the black any time soon.

The last time Le Saunda posted a profit was in the year to February 2017, of $10.5 million.

Chairman James Ngai said in a results filing that the group’s total revenue in the year to February fell 19 percent to $103.26 million. The company, which trades under the brands Le Saunda, Linea Rosa, Pitti Donna and CNE, closed a net 85 stores during the year leaving its chain at 441. The majority of the closures were company-owned stores, the balance of 11 Mainland China franchised outlets.

Ngai said the Sino-US trade conflict dampened consumer sentiment on the mainland, the major source of its revenue, and then the Covid-19 outbreak drove sales down further.

“While the Hong Kong market was expecting that consumption would be stimulated during the traditional peak season of the Chinese New Year, there came the threat of the Covid-19 epidemic, worsening the already gloomy local market and pushing Hong Kong’s retail industry into a super-cold winter,” he said.

Hit by the local social events, Covid-19 and the external economic uncertainties, sales in Hong Kong and Macau decreased by 46.8 percent to $4.3 million. Le Saunda now has just six stores left in Hong Kong and Macau, five fewer than at the end of the previous fiscal year, and Ngai said more will close “as appropriate” given Hong Kong landlords have not dropped rents in line with falling retail sales. Le Saunda will focus on accelerating the development of local online business and work to improve service and operating efficiency of those physical stores it retains.

While the group managed to reduce its inventory by 16.1 percent year on year, because the decline in sales outweighed the change in stock levels, the inventory turnover days of finished goods stretched out by 43 days to 369 days.

Subsequent to February 29, the group closed its factory at Shunde in Guangdong as it now outsources all footwear production to external subcontractors to better manage inventory and control costs. Space within the plant continues to be used as a warehouse and for offices.