Rent reductions causes Bonjour Holdings a big loss

Bonjour Holdings sales fell 7.3 per cent last year as the health and beauty products retailer reorganised its store network.

The company reported a loss attributable to shareholders of HK$39.6 million (US$5 million), which was a significant improvement on the previous year’s loss of $202.3 million.

Same-store sales crept up 0.8 per cent, albeit that is a slower rate than the 2.3 per cent of 2017.

The Hong Kong-listed group finished the year with 39 stores in Hong Kong, Macau and Guangzhou, a reduction of just one. But during the year it relocated some stores and negotiated more favourable rental deals from its landlords on others. That strategy saw rent, as a proportion of turnover, fall from 19.1 per cent in 2017 to 15.5 per cent last year, the total rent bill down from $368.8 million to $277.6 million.

“Although the high-street shop rents started to raise slightly last year due to the recovery of the retail sector in the first half, the group has adopted an optimistic cautious strategic planning in its store network in response to the market changes,” the company said in its results announcement.

“Stores were deliberately chosen at both tourists shopping hotspots and community districts or residential areas with high population density to cater to both tourists and local communities’ needs which also helped the group to increase the market penetration.”

Tourist demographics change

The structural change to the mix of mainland tourists during the last few years has impacted on the average ticket size at Bonjour Holdings’ stores. An increasing number of arrivals are now coming from lower-tier cities with less spending power. In addition, the weak RMB and uncertain economic environment dampened the attractiveness of Hong Kong goods to mainland shoppers that they became more cautious in their spending, the company said.

Bonjour Holdings said pressure on profitability remained last year, despite the group increasing its profit margin by 0.3 per cent.

E-commerce expansion

One bright point in Bonjour Holdings’ results was the increase in online sales, up 9 per cent year on year.

As well as upgrading its own online store, Bonjour has opened flagships on e-commerce platforms Tmall Global, Kaola and Xiahongshu to increase brand visibility, provide customers with more information on products, and launch timely promotions.

“E-commerce keeps growing and social media continues to play a bigger role,” the company said in its results filing.

“The group put more effort into digital media by distributing promotional videos on Facebook and Weibo pages and regularly launched online promotional activities and special events, including “Double Eleven”.