Leisure Brand JEANSWEST Operators Sell JEANSWEST Business In New Zealand

A week after the release of the annual report, the leisure brand Jeanswest Glorious operator Glorious Sun Enterprises Ltd. (0393.HK) sunrise Enterprises Limited (hereinafter referred to as sun rising group) issued a notice on Thursday night, selling Jeanswest International (L) Ltd (hereinafter referred to as Jeanswest Jeanswest) to the group directors and major shareholders Yang Zhao and Yang Xun brothers owned "Qiao" (Qiao Si Co., Ltd.).

According to the announcement, the total value of the spanaction is HK $220 million, of which HK $46 million is the price of the shares to be sold, and the HK $174 million is the cost of behalf of the sale loan.

Asahi group said that in the past three years, the group's Australian and New Zealand markets have been in a state of deficit for two years, reflecting that if we want to regain the glory of the past, the group needs to make deep reengineering and Reinvestment in product design, market positioning and e-commerce platform, which will not only cost a lot, but also will be short-lived. Therefore, the group plans to divest this part of the business and play a positive role in the performance of the group in the next few years, and the business is selling funds for potential market investment.

Sunrise Group expects the sale of Jeanswest International will generate about HK $89 million 597 thousand.

According to statistics, in 2016, the Jeanswest retail business of Australia and New Zealand, the core of sunrise group's overseas market, dropped 12.3% to HK $955 million 100 thousand, compared to HK $1 billion 88 million 600 thousand in 2015. During the period, Australia and new two markets jointly operated 224 stores, a decrease of 4 in the same period. In fiscal year 2016, the pre tax and post tax losses of Jeanswest International were HK $80 million 289 thousand and HK $55 million 472 thousand respectively, while the pre tax and post tax profits of HK $7 million 558 thousand and HK $7 million 921 thousand were recorded in the 2015 fiscal year.

After the completion of the spanaction, Jeanswest International and sunrise group still maintained their original procurement service agreement. In the past 2017-2019 years, the Asahi group has supplied HK $308 million, HK $269 million and HK $250 million in clothing and accessories products to Jeanswest International, with a supply ceiling of HK $312 million.

Yang Zhao and Yang Xun brothers are currently serving as chairman and vice chairman of sunrise group. Two people and concerted action are currently controlling shareholders of sun rising group, holding 63.8% and two are co founding members of sun rising group.

According to the annual report of sun rising group, the net profit of the group increased by 0.2% in 2016, from HK $88 million 152 thousand to HK $88 million 320 thousand, with a HK $3 billion 336 million 500 thousand in revenue, a 24% decrease compared with HK $4 billion 389 million in 2015.

For the annual revenue decline, Asahi group attributed the group's own retail strategy mistakes. Asahi group said that the company originally intended to improve the bargaining power with the help of JEANSWEST brand design in the Chinese market to improve the gross margin. However, the result was counterproductive. The fashionable elements of JEANSWEST's brand were not favored by most consumers, and the price was too high to be accepted. Eventually, it led to a slow sale and resorted to discounts, and finally the gross margin did not rise.

In 2016, the sales of JEANSWEST brand in the Chinese market plummeted 31.2%, from HK $2 billion 805 million 700 thousand in 2015 to HK $1 billion 931 million 300 thousand, and closed 440 to 1466 throughout the year.

The strategic failure of JEANSWEST brand in the Chinese market has actually happened before in Asia's largest clothing brand Uniqlo UNIQLO. In the 2016 fiscal year, Asia's largest apparel retailer Fast Retailing Co. Ltd. (9983.T) (6288.HK) xungang group's net profit plunged 56.3%, largely because the group raised its flagship brand UNIQLO price, resulting in unsalable sales.

Besides the weakness of the mainland market of JEANSWEST brand, the sun rising group is also facing a bad year. Quiksilver Glorious Sun (group Glorious Sun), because partners, extreme sports goods retailer Quiksilver Inc., filed for bankruptcy protection in September 2015, can not provide the support and services for the rapid business of sunrise, and in addition, its retail environment of Hong Kong is severe. Therefore, the group has made necessary rectification for the business, and has gradually closed down or spanferred to the franchised store after the lease expires. In the future, it will only develop franchising and wholesale businesses.