2016 Third Quarter Operations Update 10 November 2016corp.giordano.com.hk/files/results_material/2016-09... · 10 November 2016 2Giordano 2016 Third Quarter Operations Update 3Q16

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)


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


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%)


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


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


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 CSGP

YTD Sep-16 -3% -2%


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 CSGP

YTD Sep-16 +1% +2%


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 CSGP

YTD Sep-16 -4% -4%


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


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


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 CSGP

YTD Sep-16 -5% -3%

Jun-Sep: CSS +1%; CSGP +3%


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 CSGP

YTD Sep-16 -4% -1%


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


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


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%


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%


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


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%


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%


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

Documents

2016 Third Quarter Operations Update 10 November 2016corp.giordano.com.hk/files/results_material/2016-09... · 10 November 2016 2Giordano 2016 Third Quarter Operations Update 3Q16