Stelux warns of looming loss
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Hong Kong headquartered watch retailer Stelux has warned shareholders it expects to post a loss in the first half year.
Stelux owns the City Chain network of watch stores along with eyewear brands eGG and Optical 88.
In the first quarter of this year the company reported a 7.1 per cent decline in sales. But despite a decrease in turnover due to a decline in tourist spending in Hong Kong and Macau, the company achieved an 85.8 per cent increase in sales of its fashion eyewear chain eGG in the China Mainland, a 23.4 per cent increase in City Chain sales there, and a more modest 0.2 per cent gain in its Optical 88 chain.
Fast forward to last Friday, however, and it warned interest charges, exchange rate losses and weakening Hong Kong and Macau sales will see it record a loss for the full six months.
It reported “a decrease in turnover and gross profit caused by weak retail sentiment… particularly in Hong Kong, Macau and Southeast Asia (with moderate turnover growth recorded in Mainland China).”
In the six months to September 30 last year it posted a profit of more than HK$105 million (about US$13.5 million).
“Despite the anticipated loss, the group is expected to report a positive operating profit, an improved gearing ratio (with a reduction in bank borrowings of approximately HK$130 million) and stable liquidity in the reporting period,” the statement concluded.
Questions & Answers
Q.What factors are contributing to Stelux's anticipated loss for the first half of the year?
What factors are contributing to Stelux's anticipated loss for the first half of the year?
The company expects to post a loss due to interest charges, exchange rate losses, and weakening sales in Hong Kong and Macau. This comes despite some growth in its Mainland China operations.
Q.Which of Stelux's brands are performing well despite the overall decline in sales?
Which of Stelux's brands are performing well despite the overall decline in sales?
Sales of the fashion eyewear chain eGG increased by 85.8 per cent in Mainland China. The City Chain network also saw a 23.4 per cent rise in sales there, with Optical 88 gaining 0.2 per cent.
Q.How did Stelux perform financially in the same period last year?
How did Stelux perform financially in the same period last year?
In the six months ending September 30 last year, Stelux reported a profit exceeding HK$105 million, which is approximately US$13.5 million. This contrasts with the current anticipated loss.
Q.What positive financial indicators does Stelux expect despite the looming loss?
What positive financial indicators does Stelux expect despite the looming loss?
Stelux anticipates reporting a positive operating profit and an improved gearing ratio. The company also expects to reduce bank borrowings by around HK$130 million and maintain stable liquidity during the reporting period.
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Stelux's expected loss:
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