2016 Third Quarter Operations Update 10 November...
Transcript of 2016 Third Quarter Operations Update 10 November...
2016 Third Quarter Operations Update 10 November 2016
10 November 2016 Giordano 2016 Third Quarter Operations Update 2
3Q16 Overview Group sales 3%; Group CSS 3% and Group CSGP 2%; early religious holidays in
some markets shifted sales peak from Jul to Jun this year. Group CSS and CSGP were flat during Jun to Sep YOY.
Gross profit margin 0.3pp to 58.3%, gross profit 3%, attributable to lower material costs denominated in RMB and changes in product mix.
Inventory turnover days on cost flat at 76 days YOY; Group inventory 10% and system inventory 17%.
Free cash flow from operations 8% YOY due to decrease in working capital.
Cash and bank balances at HK$1,026m (30 Sep 2015: HK$950m)
10 November 2016 Giordano 2016 Third Quarter Operations Update 3
Change translated at
(In HK$ million) 3Q16 3Q15
current exchange
rates
constant exchange
rates Comments
Mainland China 270 299 -10% -5% Decreased sales from VIP.com
Hong Kong & Macau 217 225 -4% -4% Closure of high rental shops
Taiwan 135 136 -1% -4% Sluggish economy
Rest of Asia Pacific 334 313 +7% +3% Jun-Sep CSS +3%; Thailand continues strong growth
Middle East 159 175 -9% -9% Jun-Sep CSS +1%
Group wholesale to overseas franchisees
82 92 -11% -11% Mainly from Korea due to warm autumn
Total 1,197 1,240 -3% -4%
Group Sales by Region
10 November 2016 Giordano 2016 Third Quarter Operations Update 4
Store Portfolio at September 30, 2016 Footprint expansion in China third- and fourth-tier cities and SEA
Worldwide 2,388 stores
in 30 countries (YOY +29 stores)
2,293k sq. ft. (YOY flat)
Mainland China 904 (38%) -9
(DOS -40; AD +31)
742k sq. ft. (32%) (-4%)
(DOS -15%; AD +6%)
Rest of Asia Pacific 583 (24%) +24 (ID +27; TH +7;
MY +2; SG +1; AU +1; IN -14)
571k sq. ft. (25%) (+8%)
Middle East 195 (8%) -7
(KSA -2; KW +2; others -7)
227k sq. ft. (10%) (-9%)
Store number, YOY change Retail floor space, YOY change
Legend:
Taiwan 206 (9%) +7
202k sq. ft. (9%) (+1%)
Hong Kong & Macau 68 (3%) -2 79k sq. ft. (3%) (-12%)
Overseas franchisees 432 (18%) +16
(KR -7; PH +9; MM +10;
VN +4; JP +2; NP +1; others -3)
472k sq. ft. (21%) (+6%)
10 November 2016 Giordano 2016 Third Quarter Operations Update 5
Quarterly Global Brand Sales and YOY Change Jun-Sep global brand sales 1%, improved from 1H (2%)
2,047
1,745 1,637
1,525
1,946
1,678 1,633 1,482
-4%
2%
0%
-1%
-5%
-4%
0%
-3%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
0
500
1,000
1,500
2,000
2,500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
(%) (HK$ million, at 2016 exchange rates)
Global brand sales Global brand sales growth
10 November 2016 Giordano 2016 Third Quarter Operations Update 6
Quarterly CSS and CSGP Change 3Q CSS excluding ME, MY and ID 1%, CSGP was flat.
0%
12%
7%
5%
-4%
-2%
2%
-3% -3%
8% 7%
6%
-3%
0% 1%
-2%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 -1% Flat
Jun-Sep: CSS Flat; CSGP Flat
10 November 2016 Giordano 2016 Third Quarter Operations Update 7
Mainland China quarterly CSS and CSGP change
1%
14%
10%
4%
-2% -3%
-2%
-6%
0%
10%
9%
4%
0%
2%
-3%
-6%
-10%
-5%
0%
5%
10%
15%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 -3% -2%
10 November 2016 Giordano 2016 Third Quarter Operations Update 8
Hong Kong and Macau Quarterly CSS and CSGP Change
-3%
12%
4%
12%
-1%
1% 1%
3%
-4%
9%
5%
11%
0%
2% 3%
5%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 +1% +2%
10 November 2016 Giordano 2016 Third Quarter Operations Update 9
Taiwan Quarterly CSS and CSGP Change
5%
18%
5% -1%
-13%
-3% -5%
-5%
5%
16%
7%
-2%
-14%
-4%
-8%
-3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 -4% -4%
10 November 2016 Giordano 2016 Third Quarter Operations Update 10
Rest of Asia Pacific Quarterly CSS and CSGP Change
1%
11%
6% 6%
0%
4%
7%
-1%
-6%
7% 6% 6%
-2%
4% 5%
0%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
3Q16 YTD Sep-16
CSS CSGP CSS CSGP
Rest of AP -1% Flat +3% +3%
Singapore Indonesia Malaysia Thailand Australia
-3% -5% -8%
+16% -8%
-1% -6% -5%
+17% -14%
+1% +3% -3%
+15% -11%
Flat +2% Flat
+15% -16%
Jun-Sep Rest of AP: CSS +3%; CSGP +3% ID: CSS+4%; CSGP +2% MY: CSS-4%; CSGP flat
10 November 2016 Giordano 2016 Third Quarter Operations Update 11
Middle East Quarterly CSS and CSGP Change
-6%
-1%
4%
1%
-12%
-15%
7%
-8%
-11%
-2%
7% 7%
-7%
-11%
7%
-7%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 -5% -3%
Jun-Sep: CSS +1%; CSGP +3%
10 November 2016 Giordano 2016 Third Quarter Operations Update 12
South Korea Quarterly CSS and CSGP Change
-8%
-11%
0%
-3%
3%
-1%
-4%
-8%
-13%
-17%
-1%
-7%
-1%
2%
-3% -4%
-20%
-15%
-10%
-5%
0%
5%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
CSS change CSGP change
CSS CSGP
YTD Sep-16 -4% -1%
10 November 2016 Giordano 2016 Third Quarter Operations Update 13
Quarterly Group gross profit margin and YOY change 3Q GP margin improved due to decrease in average cost of 2%. ASP was flat.
57.0% 55.2%
59.5% 58.0% 57.8% 57.7% 61.5%
58.3%
-1.8% -1.7%
-0.9%
0.1%
0.8%
2.5%
2.0%
0.3%
-3%
-2%
-2%
-1%
-1%
0%
1%
1%
2%
2%
3%
3%
0%
10%
20%
30%
40%
50%
60%
70%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
YOY change (%) Gross profit margin (%)
Quarterly Gross Margin Quarterly YOY Change
10 November 2016 Giordano 2016 Third Quarter Operations Update 14
Gross Profit Variance Analysis by Region
(In HK$ million)
3Q15 Gross profit
Average product
costs
Average selling price
Volume
Exchange
impact Misc.
3Q16 Gross profit
Mainland China 161 (7) 3 (10) (7) 140
Hong Kong & Macau 148 1 10 (12) 147
Taiwan 80 1 (1) (2) 3 81
Rest of Asia Pacific 185 (12) 17 (5) 15 3 203
Middle East 115 8 (7) (13) 103
Wholesale & Intercompany
30 15 (16) (1) (4) 24
Market mix (3) (4) 7
Group 719 3 2 (36) 11 (1) 698
Remark: The above variances also embeds product and channel mixes.
Average product costs -2% from lower material costs denominated in RMB and changes in product mix
Favorable exchange movement in rest of Asia Pacific helped GP margin
Average selling price was flat due to upward adjustment of selling price in rest of AP offset by lower ASP from wholesale due to less contribution from Korea
Volume -4% mainly from closure of shops in Greater China
10 November 2016 Giordano 2016 Third Quarter Operations Update 15
Inventory Management ITOC was flat at 76 days YOY
472 491 424
76 78 76
0
10
20
30
40
50
60
70
80
90
0
100
200
300
400
500
600
Sep-15 Dec-15 Sep-16
(Days) (HK$ million)
Inventories ITOC
Core items 27%
Current season
55%
Previous seasons &
others 18%
Core items
Current season
Previous seasons & others
Sep 2016
82%
10 November 2016 Giordano 2016 Third Quarter Operations Update 16
System inventory (In HK$ million)
As at
Sep 30
2016
Dec 31
2015
Sep 30
2015
YOY
change
Inventories held by the Group 424 491 472 10%
Inventories held by franchisees in mainland China 79 75 88 10%
Finished goods at suppliers (not yet shipped) 22 67 69 68%
Total system inventory 525 633 629 17%
Inventory Ageing Analysis
Core items 21%
Current season
59%
Previous seasons & others
20%
Sep 2015
80%
10 November 2016 Giordano 2016 Third Quarter Operations Update 17
Outlook Focus on improving CSS and CSGP growth through operational improvements
Outlook by market
Mainland China: provide further assistance to franchisees in operations and marketing to help them expand its network in third- and fourth-tier cities
Hong Kong: continue rental savings initiatives, improve shop ambience, re-invigorate marketing campaign, and be cautious in retail network expansion
Taiwan: carefully evaluate its non-performing stores and its expansion plans
Rest of Asia Pacific: use strategic marketing campaigns to boost selling price
Middle East: continue to monitor its costs while further reinforce merchandising
Continue to sustain good cash balances by properly managing our working capital and cash flow from operations
10 November 2016 Giordano 2016 Third Quarter Operations Update 19
Group Sales by Country Change translated at Change translated at
(HK$ millions) 3Q16 3Q15
current exchange
rates
constant exchange
rates
YTD Sep-16
YTD Sep-15
current exchange
rates
constant exchange
rates
Mainland China 270 299 -10% -5% 907 1,061 -15% -10%
Hong Kong & Macau 217 225 -4% -4% 674 704 -4% -4%
Taiwan 135 136 -1% -4% 458 476 -4% -1%
Rest of Asia Pacific 334 313 +7% +3% 992 951 +4% +6%
Singapore 74 74 +1% -4% 229 229 Flat -1%
Indonesia 128 119 +7% +2% 360 328 +10% +9%
Malaysia 37 40 -6% -7% 124 132 -6% Flat
Thailand 71 55 +29% +24% 213 185 +15% +20%
Australia 19 19 +4% -2% 52 59 -11% -10%
India 3 5 -38% -34% 9 14 -33% -29%
Cambodia 2 1 +47% +46% 5 4 +37% +36%
Middle East 159 175 -9% -9% 474 495 -4% -4%
Retail & Distribution 1,115 1,148 -3% -3% 3,505 3,687 -5% -3%
Wholesales to overseas franchisees
82 92 -11% -11% 224 289 -22% -22%
Group total 1,197 1,240 -3% -4% 3,729 3,976 -6% -4%
10 November 2016 Giordano 2016 Third Quarter Operations Update 20
CSS and CSGP Growth by Country
CSS CSGP
(HK$ millions) 3Q16 3Q15 YTD
Sep-16 YTD
Sep-15 3Q16 3Q15 YTD
Sep-16 YTD
Sep-15
Mainland China (6%) 4% (3%) 9% (6%) 4% (2%) 9%
Hong Kong & Macau 3% 12% 1% 11% 5% 11% 2% 10%
Taiwan (5%) (1%) (4%) 8% (3%) (2%) (4%) 7%
Rest of Asia Pacific (1%) 6% 3% 8% Flat 6% 3% 6%
Singapore (3%) 19% 1% 12% (1%) 18% Flat 13%
Indonesia (5%) 5% 3% 5% (6%) 2% 2% Flat
Malaysia (8%) (9%) (3%) (6%) (5%) (6%) Flat (7%)
Thailand 16% 9% 15% 18% 17% 12% 15% 18%
Australia (8%) 1% (11%) 10% (14%) (2%) (16%) 9%
India (29%) (25%) (41%) (10%) (35%) (24%) (41%) (16%)
Cambodia 46% 8% 36% n/a 45% 9% 32% n/a
Middle East (8%) 1% (5%) 1% (7%) 7% (3%) 4%
Group total (3%) 5% (1%) 8% (2%) 6% Flat 8%
10 November 2016 Giordano 2016 Third Quarter Operations Update 21
Store Portfolio Store numbers at Sep 30 Retail floor space at Sep 30
(sq. ft. in thousands)
2016 2015 2016 2015
Mainland China
Direct-operated stores
358 398 301 354
Franchised stores 546 515 441 417
Hong Kong & Macau 68 70 79 89
Taiwan 206 199 202 199
Rest of Asia Pacific 583 559 571 530
Singapore 48 47 56 53
Indonesia 235 208 294 261
Malaysia 88 86 71 71
Thailand 154 147 102 93
Australia 22 21 34 32
India 35 49 11 17
Cambodia 1 1 3 3
Middle East 195 202 227 248
Overseas franchisees 432 416 472 446
Global total 2,388 2,359 2,293 2,283