Daphne Continued Losses In 2018 To Speed Up Closing Losses Stores

In March 27th, Daphne International (00210, hereinafter referred to as Daphne) announced its 2018 performance report.

According to the announcement, in 2018, Daphne realized a turnover of HK $4 billion 127 million, down 20.8% from the same period last year, and increased its operating losses by 97 million 800 thousand to HK $787 million. The deficit of shareholders accounted for about 994 million Hong Kong dollars, up 35.4% over the same period last year.

According to the announcement, Daphne believes that the decrease in turnover is mainly due to the reduction in the number of stores in its core brand business by 26.2% to 2648, and the decline in sales in the same store, leading to a decline in its sales.

Due to the increase in the proportion of over the past inventory in the sales mix, the gross profit margin of the group decreased to HK $2 billion 61 million, and the gross profit margin dropped to 49.9%.

In the face of deteriorating business environment, Daphne has accelerated the closing of the loss shop to enhance overall business efficiency.

On the other hand, Daphne is also trying to increase its market penetration through the sales channels of more fashionable shopping centers in order to adapt to the fast changing consumption patterns and consumer preferences.

In 2018, Daphne closed 1016 sales outlets in the year. In December 31, 2018, it had a total sales point of 2820, including 2648 sales outlets of core brand business and 172 sales outlets of other brand businesses.

It is understood that Daphne's core brand business refers to the retail business of footwear products and accessories sold in mainland China, Daphne and shoe cabinet.

The annual net closing of 941 sales outlets (including 899 Direct stores and 42 franchised stores) reduced the number of sales of its core brand business by 26.2% over the same period last year.

In December 31, 2018, Daphne's core brand business had 2648 sales outlets, including 2404 direct outlets and 244 franchised stores.

In the whole year of 2018, core brand business and same store sales fell by 7.6% per annualized year.

As the sales network narrowed and the same store sales fell, the core brand business turnover fell 19.2% to HK $3 billion 799 million, and the core brand business accounted for 86% of the group's total revenue.

The gross profit margin of core brand business decreased by 4 percentage point to 45.2% in 2018, and the average selling price dropped to 155 yuan.

In terms of brand marketing, Daphne continues to cooperate with the US fashion brand "Opening Ceremony" to launch cross-border cooperation projects, aiming to resonate with young consumers.

In the first quarter of 2018, cross boundary cooperation projects successfully launched spring and summer products.

In the third quarter of this year, Disney and China's famous female singer Zhou Bichang launched the crossover product with the theme of the most beautiful "seven".

Daphne also launched a series of integrated marketing activities for its products, including social media marketing and live broadcast activities, including invited stars to attend flash shop activities, endorsement of key opinion leaders.

The turnover of other brand businesses decreased by about 20.6% to HK $582 million 500 thousand, mainly due to the challenging retail market environment and a net decrease of 30.4%, or 75 sales points, in the past year.

Other brand business segments accounted for about 14% of the group's total turnover in 2018.

As a result of active cleaning up over the past quarter inventory and electricity business sales accounted for the rise, compared to the previous year, other brand business gross margin fell 3.8 percentage points to 54.4%, plus negative operating leverage, which led to other brand business losses of HK $26 million 700 thousand.

During the year, the electricity supplier business continued to increase its contribution to the group's turnover and maintain profitability.

In addition, despite the overall slowdown in the online retail market, its operating profit margins have improved.

This is because the group adopts policies to stabilize product prices and reduce promotional activities.

In order to adapt to the fast changing consumer behavior and consumption patterns, the group has launched more funds for online sales and strengthened cooperation with emerging e-commerce and social platforms.

The group also accelerated the integration of its online and offline businesses as part of its new retail strategy and adopted a brand new information technology solution to provide customers with seamless "new retail" shopping experience integrating online and offline.