Continuous Bet On Middle East Market Giordano Increases Giordanouae Remaining 51% Legal Interest

In September 4th, Giordano International released the announcement that according to the announcement of the remaining 51% legal interests and 20% economic interests of GIORDANO FASHIONS L.L.C. based on the put option, it was intended to purchase 51% remaining legal rights and 20% economic interests of Giordano brand Giordano sold in the Middle East for 2 million 650 thousand dollars.

According to the UAE agreement, the residual interest in UAE acquisition is deemed to have been completed in May 31, 2019.

According to the announcement, after the completion of the UAE agreement, Al Majal acts as an agent for Eletop to hold Eletop UAE51%'s statutory rights and interests acquired by Eletop according to UAE's completion agreement, and acts directly or through its representative country's administrator in Giordano UAE business. The economic rights and interests of Giordano UAE and the agreement of agency manager have the right of comprehensive ownership and control in Giordano UAE.

It is understood that Giordano UAE is a registered company in UAE, mainly in the United Arab Emirates and the Middle East, and a number of overseas markets engaged in retail and distribution of Giordano brand goods.

The Middle East market is becoming an important direction for clothing brands to open up the international market. The Middle East garment industry is in the recovery stage, and its growth ability has very large space. The clothing companies such as Hai Lan home and Semir have opened stores in the Middle East market to seize the opportunity. Giordano International's performance in the Middle East market is also improving.

According to the data, Giordano International's net profit and revenue have declined in the first half of 2019, but the Middle East market is the only growth market, while Asia Pacific's other market revenue has dropped by 3.7% to HK $807 million.

Giordano's international performance continued to experience slump, and sales continued to decline. In the first half of 2019, operating income reached HK $2 billion 542 million, down 11.1% compared with the same period last year, and net profit reached HK $161 million, down 36.6% compared with the same period last year. Giordano International said the warm winter weather and trade friction had adverse effects.

In addition, Giordano International said that the continuing rise in labor costs and the downturn in the macroeconomic environment had a certain impact on earnings. In the future, Giordano will further seek opportunities to reduce product costs and operating expenses.

In addition to the sluggish sales environment, the gradual increase of clothing production costs has become a headache for enterprises. The rising cost of manufacturing in China has prompted many international brands and foundries to shift their production to less expensive Southeast Asian countries, such as Vietnam, Kampuchea and Bangladesh.

Giordano international has focused on the new growth market in the Middle East and Southeast Asian countries. Although the Middle East business has experienced a downward trend last year, it has become the only growth market in the first half of 2019. The operating income during the reporting period has reached HK $344 million, up 2.4% from the same period last year. In its annual performance in 2018, Giordano achieved growth in other Asian Pacific markets such as Indonesia and Thailand, operating income of HK $1 billion 618 million, an increase of 7.7% over the same period last year, and operating profit of HK $234 million, an increase of 14.8% over the same period last year.

According to the data, as of June 30, 2019, Giordano international has 2424 retail market networks, of which 1316 are independent stores, most of which are located in Greater China, South Korea, Southeast Asia and the Middle East.

Giordano international has put the new growth market in these areas. One is the low cost of labor parity in these countries and regions; the second is the opportunity for growth in the clothing market in Southeast Asia and the Middle East. Giordano international seize the opportunity to compete for these markets and gain development opportunities.

Giordano International's acquisition of UAE residual rights will consolidate its control over Giordano UAE, pave the way for potential additional dividends and establish business synergy value.