Why Is It Difficult For Apparel Stocks To Run?

Giordano (00709-HK) recently issued a surplus police, pointed out that the consumer demand in the Greater China market is weak, and the depreciation of the RMB and Southeast Asian currencies and other factors, it is expected that the profits of shareholders in the first half of this year will be significantly reduced. Giordano's weak performance may be a public listing in Hong Kong. clothing The microcosm of the stock market, including the latest operating data released by IT (00999-HK) and other companies, also shows that the Greater China market is still in the doldrums, and clothing stocks are inevitably under pressure.

After the Giordano issued the profit police, it dragged down a number of clothing stocks, Giordano reported 4.44 yuan at the latest, fell 14.12%, IT fell 2.8%, the latest reported 2.02 yuan, 00483-HK (Bauhaus International) fell 5.04%, the latest reported 2.26 yuan.

The slow down of the environment is the reason for the poor sales of services. Since the gradual expansion of the number of cities that mainland tourists travel to Hong Kong in 2003, it has been seen as a panacea for the development of Hong Kong's retail industry. However, the retail sales figures released by the government in March have issued a warning to market participants.

According to statistics released by the statistics department, the value of retail sales in Hong Kong in March was 39 billion 600 million yuan, down 1.3% year on year and 2 months down, the first time since August 2009. The value of clothing sales increased by 5.7% year on year, slower than the 10.1% increase in the first 2 months of this year. Meanwhile, the government has also announced that the number of visitors from the mainland has decreased by 1.7% to 387 thousand and 700 during from May 1st to 3rd, the first time since the implementation of the free trade in 2003, reflecting the slowdown in the growth momentum of the retail industry in Hong Kong.

Meanwhile, the mainland's first quarter economic growth this year was 7.4%, the slowest season since the first quarter of 2009, further dragging down the sales performance of a large number of clothing stocks.

According to IT's announcement at the beginning of this year, the third quarter data at the end of November last year, the same store sales in Hongkong and the mainland market respectively dropped by 3.4% and 6% respectively. For the first three quarters, the same store sales in Hongkong and the mainland market were 7.4% and 3.5% respectively.

The sales figures released by Bauhaus in early April showed that the same store sales in Hongkong and Macao increased by 16% in the first quarter of March, while the increase in Taiwan was 12% and the mainland market was 5%. In the whole financial year, Hongkong and Macao increased by 21%, Taiwan increased by 19%, and the mainland increased by 11%. At the end of March this year, the same store sales in three regions were not as good as the first three quarters.

As for Giordano, who first issued a profit warning in the first half of this year, its sales in the same store last year were not ideal, and the same store sales fell by 2%. Sales in the mainland market, which accounted for 30% of the company's sales, dropped by 6%, while the same sales in Hongkong and Taiwan markets were flat. Sales data from the above three companies and Giordano in the Ying police notice pointed out that the consumer demand in the Greater China market continued to be weak, confirming that the market environment was one of the reasons for the drag on sales performance.

In addition to environmental factors, the company's own business strategy is also one of the reasons for the drag on sales performance. Taking Giordano as an example, it pointed out in the annual performance bulletin last year that it is striving to distinguish the brand from other "leisure". Clothes & Accessories However, the implementation of brand repositioning is slower than expected, reflecting the shortcomings of the company in positioning its brand in the mainland.

Although Giordano chairman Liu Guoquan announced at the annual performance meeting last year, the new brand "Beau Monde" will be launched in the second quarter of this year. The price of the product will be three to 40% of Giordano. At present, the contribution of the low price brand to Giordano is difficult to quantify at the moment. At the same time, whether the low price strategy can help the company turn around in the mainland market is worth investors' attention.

In fact, the company is also concerned about Giordano's positioning in the mainland market. Deutsche Bank also issued a report after it issued an earnings warning to Giordano, pointing out that its position in the mainland market has not been successful, and its operation has not improved in the past few years, plus products manufactured in the mainland, and the depreciation rate of RMB is less than that of Southeast Asian currencies, which has an impact on gross margin. The bank forecasts that Giordano's annual profits will regress 11%, reaffirming the "holding" rating and the target price of 5.3 yuan. Morgan Stanley sang Giordano, dropping the target price from 7.9 yuan to 4.6 yuan.

On the other hand, Hong Kong retail Market growth is slowing down. If we can not control rent and labor costs, we will have a further negative impact on earnings performance. By the end of last year, Giordano's rent accounted for 20.9% of sales, up 1.07 percentage points from 19.83% in 2012. In the first half of September last year, the ratio of sales to sales reached 26.2%. Assuming that the rent remains unchanged in the future, sales can not be recorded, and the performance of clothing stocks is hard to see.