Sa Sa International’s shares decline on profit warning
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Shares of Sa Sa International Holdings, Hong Kong’s largest cosmetics chain, declined almost 1% here on Wednesday morning after the company warned of a profit decline for the financial year ended in March.
The group carries both its own brands and international cosmetics. It boasts over 280 stores across Asia. While sales in its major markets of Hong Kong and Macau recovered toward the end of 2016, online sales were below expectations.
Simon Kwok Siu-ming, Sa Sa’s chairman and CEO, said in a statement that the group’s efforts to adjust its product lineups to better align with a market demanding trendy products has “caused a continued downward pressure on gross profit margin.”
Hong Kong’s entire retail environment is facing headwinds due to fewer tourist arriving from mainland China. Retail sales in the territory last year dropped 8.1%.
Some analysts see a recovery — at least one led by mainland tourists — as hard to come by.
“Retail sales in Hong Kong are not going to have a strong boost from Chinese tourists like before,” said Andes S.C. Lau of Prudential Brokerage in Hong Kong.
Still, further big drops are unlikely.
Lau sees Sa Sa’s share price, which is hovering at a year-to-date low, as being “supported by investors buying on weakness.”
Questions & Answers
Q.What is the approximate turnover for Sa Sa International for the three months ending in March?
What is the approximate turnover for Sa Sa International for the three months ending in March?
Sa Sa International's turnover for the three months through March was 2.02 billion Hong Kong dollars, which is approximately 260 million US dollars. This figure represents a 4.9% increase from the same period the previous year.
Q.Why has the company’s gross profit margin been under pressure?
Why has the company’s gross profit margin been under pressure?
The company’s gross profit margin has faced continued downward pressure due to efforts to adjust product lineups. These adjustments were made to better align with market demand for more trendy products.
Q.What factors are impacting Hong Kong's retail environment generally?
What factors are impacting Hong Kong's retail environment generally?
Hong Kong's retail environment is facing headwinds due to fewer tourists arriving from mainland China. Retail sales in the territory dropped 8.1% last year, and a strong recovery led by mainland tourists is not expected.
Q.What is the expected decline in net profit for the full financial year?
What is the expected decline in net profit for the full financial year?
The company has warned that net profit for the full financial year, which ended in March, could fall anywhere from 10% to 20%. This profit warning led to a decline in share prices.
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