Sa Sa profits dive
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Sa Sa profits took a hit of 37.3 per cent for the six months to September 30.
The Hong Kong-listed beauty products retailer’s interim results show turnover easing by 4 per cent to HK$3.628 billion (US$467.7 million) for the period, with retail sales in Hong Kong/Macau decreasing by 3.6 per cent to HK$2.9032 billion.
Profit fell from $153 million to $96 million with its gross profit margin dropping from 42.9 to 41.2 per cent.
During the six months, the group rationalised its retail network from 291 to 283 – six fewer Sasa stores and two fewer single-brand stores/counters.
While sales fell in Hong Kong/Macau, the number of transactions rose by 0.2 per cent for local customers and 4.4 per cent for Mainland Chinese tourists. The value of each transaction, however, fell by 6.3 and 6.6 per cent respectively.
Retail sales in Hong Kong continued to be weak, mainly because of average transaction values being lower. The company says the underlying reasons were a change in consumer preferences, a strong Hong Kong dollar and a depreciating yuan. Also, the policy change limiting Shenzhen residents’ multiple-entry permits to one visit a week has had a “significant” impact.
However, Sa Sa reports an uptick toward positive growth in July as the company adapted with faster product launches, shorter product cycles and cheaper trendy products.
Korean swing
As an indication of market change, Sa Sa’s Korean product mix grew from 16.7 per cent of total sales to 23.5 per cent, and the parallel-imported product mix increased from 29.1 to 31.7 per cent. Sales for house brands dropped from 41.5 to 38.5 per cent.
Overall turnover for Mainland China decreased by 4.3 per cent to $135 million, while same-store sales fell 5.1 per cent. The loss for the period amounted to $13.7 million. Profitability was impacted by the relocation of warehouses.
Turnover for Singapore at $101.3 million was a drop of 11.1 per cent. As well as weaker sales, management issues impacted performance. While turnover was high, this created difficulties in retaining the knowledge base. However, a restructuring process has drawn on the resources of the relatively strong Malaysian management team.
“Profit fell from $153 million to $96 million with its gross profit margin dropping from 42.9 to 41.2 per cent.”
Malaysia’s turnover was down 19.1 per cent to $163.4 million, though same-store sales rose 11.2 per cent. Retail sales growth exceeded other markets thanks to the group’s strong retail network and effective marketing campaigns.
Turnover in Taiwan fell by 23.1 per cent to $98.3 million, with same-store sales tumbling 19.5 per cent because of weak consumer sentiment and ongoing restructuring of the management team.
Logistics problem
In eCommerce, Sasa.com turnover reached $193 million, a dip of 0.1 per cent. Sales were affected by the appointment of a new logistics provider in April with the aim of increasing scalability. However, changeover difficulties resulted in a decision to return to the original service provider.
“Significant numbers of orders had to be cancelled, and further costs were incurred by moving inventory back and forth as well as the running of two warehouses in parallel during the period,” says the company.
Building on the growth of mobile internet use, the company launched a mobile app and started a collaboration with eCommerce platform Kaola in addition to its partnership with JD.com, Suning.com and T-Mall.
On the mainland, the dynamics of the cosmetics market are changing with internet retailing growing at a rapid pace, says the company. Because of these challenges, it is continuing to strengthen management and recruit staff.
“We are also seconding experienced staff from Hong Kong to improve the attractiveness of our product offerings and strengthen inventory management.”
Questions & Answers
Q.What were the main reasons for the decline in average transaction values in Hong Kong and Macau?
What were the main reasons for the decline in average transaction values in Hong Kong and Macau?
The decline was primarily due to a shift in consumer preferences, a strong Hong Kong dollar, and a depreciating yuan. Also, a policy change limiting Shenzhen residents' multiple-entry permits to one visit a week significantly impacted sales.
Q.How did Sa Sa's product mix change during this period to adapt to market shifts?
How did Sa Sa's product mix change during this period to adapt to market shifts?
Sa Sa increased its Korean product mix from 16.7% to 23.5% of total sales, and parallel-imported products rose from 29.1% to 31.7%. Conversely, sales of house brands decreased from 41.5% to 38.5%.
Q.What issues did Sa Sa encounter with its eCommerce logistics during the six months?
What issues did Sa Sa encounter with its eCommerce logistics during the six months?
The company appointed a new logistics provider but experienced changeover difficulties, leading to cancelled orders and extra costs from moving inventory. This prompted a decision to revert to the original service provider.
Q.Which markets saw a decline in turnover, and which had positive retail sales growth?
Which markets saw a decline in turnover, and which had positive retail sales growth?
Turnover decreased in Mainland China, Singapore, Malaysia, and Taiwan. However, Malaysia stood out with positive retail sales growth, exceeding other markets due to its strong retail network and effective marketing efforts.
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