Oriental Watch profit steady despite sales drop
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Oriental Watch’s sales fell by 15.7 percent last year – but the company’s bottom line was only minimally affected, in part due to reduced rents.
The Hong Kong-listed retailer says that while the number of mainland visitors to the territory recovered last calendar year, the China-US trade dispute had brought uncertainties to the market. Subdued consumer sentiment and currency rate fluctuations had also impacted on sales.
Chairman Yeung Ming Biu said the company had focused on stringently controlling rent and other costs for the last five years. The group’s aggregate rental cost (excluding related property management fees) decreased by 4.1 percent in the year to March 31 to HK$162 million, accounting for 34 percent of the group’s overall operating expenses – almost one percentage point less than the previous year.
That result despite relocating the company’s flagship store from 100 Queens Road, Central, to 50 Queens Road, in the heart of the city’s upscale boutiques.
“The group believes that the change of location will further fuel the brand presence and the sales once it starts operation,” he said. “In addition, regular internal assessment on the performance of all retail stores and closedown of high-rent yet non-performing stores are also the group’s strategy for better resources allocation.”
Group turnover last year was $2.437 billion, (US$312 million), with gross profit down just 0.7 percent to $603 million and gross profit margin up from 21 percent to 24.7 percent. Profit attributable to shareholders was $138 million, just 0.7 percent less than the prior year.
Oriental Watch has 61 stores, 46 of them in Mainland China, 11 in Hong Kong, three in China and one in Macau.
products and purchasing stock only when existing inventory depleted to a pre-agreed level. As at March 31, overall inventory was $824 million, down 17.7 percent from the $1.001 billion of a year earlier.
“In parallel, the group has also continued to step up its efforts in adjusting and optimizing its brand portfolio, in order to stabilize the group’s overall sales performance and keep abreast of market trends. Oriental Watch will continue to maintain a lower inventory level for a better cash position and a sustainable business development in the future,” said Yeung Ming Biu.
Questions & Answers
Q.How did Oriental Watch manage to keep its profit steady despite a significant drop in sales last year?
How did Oriental Watch manage to keep its profit steady despite a significant drop in sales last year?
The company maintained profit by stringently controlling rent and other costs, a strategy it has employed for five years. Gross profit margin also increased from 21% to 24.7%, further helping to offset the sales decline.
Q.What measures has Oriental Watch taken to reduce its operating expenses?
What measures has Oriental Watch taken to reduce its operating expenses?
The group has focused on controlling rent costs, relocating its flagship store, and closing high-rent, non-performing stores. Its aggregate rental cost decreased by 4.1% last year, accounting for a smaller percentage of overall operating expenses.
Q.What is the company's strategy for managing its inventory and brand portfolio?
What is the company's strategy for managing its inventory and brand portfolio?
Oriental Watch purchases stock only when existing inventory depletes to a pre-agreed level, resulting in a 17.7% reduction in overall inventory. It also continually adjusts and optimises its brand portfolio to stabilise sales and follow market trends.
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