Giordano'S Lofty Aspirations Are Hard To Pay. In The Third Quarter, Sales Fell Nearly 9%.

Recently, Giordano International announced that as of September 30, 2019, group sales decreased by 8.6% in the third quarter, compared with 10.3% in group sales. This is another decline in performance after Giordano's 11.12% decline in first half revenue and 36.61% decline in net profit.

According to the announcement data, sales volume in mainland China in July -9 was HK $20 million 800 thousand, down 17.13% compared to the same period last year. In all regions, only the Middle East has increased. The total sales volume was HK $1 billion 75 million, down 8.6% from HK $1 billion 176 million last year, or 7.1% if converted at a fixed exchange rate.

According to public information, Giordano was established in 1981 and listed in Hongkong in June 1991. In August 1992, Giordano entered the Chinese mainland market. As China's first casual wear retail chain brand, Giordano and Baleno, fort lion dragon is also known as the "Hong Kong clothing brand three giants." In 2000, Giordano's revenue reached HK $3 billion 488 million, and the profit attributable to shareholders was HK $416 million. Prior to this, Giordano related responsible person once said: "the vision of Giordano is to become the best and largest brand in the apparel retailing industry."

With the shrinking of Giordano in the domestic market, it has become a great probability to fall from the altar. What is so called "lofty aspirations"?

　　 Cost pressures remain in the second half of the year.

Prior to this, Giordano's interim earnings report in 2019 showed that the company's revenue fell 11.12% compared with the same period last year, and the profit attributable to shareholders fell 36.61% compared to the same period last year. This is also the first time that Giordano has seen double-digit decline in both revenue and net profit in the past ten years.

Among them, sales in comparable outlets in the Greater China region fell by 12.6%, revenue generated by e-commerce decreased by 19%, and physical store sales fell by 8.9%.

In this regard, Giordano pointed out in the earnings report that the group's performance was not ideal, partly because of the weak market economy and the tightening of credit policy.

For the second half of the performance outlook, the company said that the impact of the economic environment will continue in the second half of the year, and because of the increase in production costs of many traditional manufacturing centers in the region, as well as the cost of front-line shops for companies operating multiple markets, the cost pressures still exist in the industry.

According to the relevant earnings report of JEANSWEST's parent company sun rising enterprise, in the 2015-2017 years, the net sales of the company's retail business in China were HK $2 billion 806 million, HK $1 billion 931 million and HK $1 billion 609 million, which is in a declining trend. The total number of stores in China has been reduced from 2551 in 2013 to 1212 in 2017.

In August 2018, sunrise sold JEANSWEST's retail business in China at HK $800 million. Inside the industry, JEANSWEST has sunk to three or four line cities and regions due to the impact of fast fashion brands such as H&M and GAP.

　 Live in crevice

Giordano performed very well in the Chinese market in 90s. This is because at that time, UNIQLO, HM and ZAR have not yet entered the Chinese market, while Metersbonwe and Semir have not risen, and market demand is greater than supply.

In order to realize the ambition of global expansion, Giordano launched the WWS transnational discount card in 2005. In addition, in order to implement the brand building plan, Giordano began to reduce discounted promotional activities since 2004. It expects consumers to be trusted by noble clothing, high quality clothing and intimate service. After customers purchase goods, they will not be qualified because of low discount or market competition.

Both revenues and net profits have declined, and the domestic market has been impacted by domestic and foreign brands. Giordano began to seek new growth points. One night before the mid term earnings announcement, Giordano issued a notice to increase the Middle East business.

Giordano UAE is a registered company in UAE, which is mainly engaged in retail and distribution of Giordano brand products in the UAE and the Middle East as well as in some overseas markets. For the reasons and benefits of the UAE residual rights acquisition, Giordano said in its announcement that the UAE residual rights acquisition will consolidate the control of Giordano UAE and pave the way for potential additional dividends and establish business synergy value.

In the interim earnings report, Giordano also expressed confidence in the Middle East Business: "the Middle East business is showing positive signs of recovery, and the Southeast Asian market, especially Indonesia and Thailand, has shown positive performance and will continue to maintain its momentum into the second half of 2019."

In the view of economist Song Qinghui, Giordano is buying the Middle East business because of expanding market space. From the perspective of clothing market, Cheng Weixiong thinks that Giordano's Middle East market is serious because of the serious decline of China's domestic market. In view of company growth, it is an inevitable trend to strengthen the development of new markets.

It remains to be seen whether the Middle East market can make Giordano reinvigorate itself, but Giordano faces more challenges than that. Backed by the new retail outlet, Giordano's e-commerce business is also facing challenges: in the first half of this year, the revenue generated by Giordano e-commerce was HK $132 million, a decrease of 19%.

epilogue

As the originator of casual wear, Giordano has made great contributions to the development of domestic brands. However, Giordano's brand innovation has not been synchronized with the rapid change of China's consumer market for decades, and is limited by its own management. Giordano's advantage in the local market has been very small.

Giordano has been operating in the mainland market for decades instead of becoming smaller and smaller. It is worth pondering. This is also not enough depth of the management's research on the mainland market. It has not respected the rapid growth of the mainland market in terms of brands, products, channels, organizations and business models, which has led to little change in Giordano and is hard to make bigger and stronger. In the future, Giordano should also focus on the main industry.