Giordano: forced to implement overseas freezing plans in winter

Girano International Co., Ltd., a Hong Kong-listed casual apparel retailer, announced that it suspended all new store projects outside the mainland and frozen recruitment plans. Giordano said that due to the failure to offset the decline in sales in Hong Kong and Taiwan, the turnover in October showed a larger decline compared with the same period of last year.

According to Giordano’s statistics, revenue in the third quarter increased by 3.6% from the same period of last year, which was driven by a 25.3% increase in sales in the mainland market. In the interview with reporters yesterday, Jordan Jorgen, executive director of Giordano China, said that sales in the Mainland continued to grow and the growth in the third quarter fell compared to the first half of the year. “We found that sales in more than 900 cities in the Mainland have not been affected much. This shows that the Mainland Confidence in consumer confidence has not been as severe as it has been imagined. Cities such as Dongguan and Shenzhen have seen a drop in business.” Ma Zhuan'an said with a smile. “There may be more people who lose money in the coastal area and lose money, affecting consumer desire.”

As of September 30, Giordano had 1949 stores worldwide. Ma Zhuanan said that from this year to September, the company has opened more than 60 stores, and in the remaining 2 months, Giordano is confident that the new store will be opened to 100. Under the financial tsunami, another company staged a "struck warrior". However, Giordano International's current round of action appears to be an ideal countermeasure for many investment banks.

The market in Hong Kong and Taiwan has declined significantly

According to Giordano’s announcement, due to the economic downturn that affected sales, the company has suspended all new store projects outside mainland China, and at the same time, it has frozen its staff. The company’s turnover in October this year has seen a larger decline in the number of units compared to the same period of the previous year, due to the fact that the increase in turnover in mainland China has not offset the decline in sales in Hong Kong and Taiwan.

Giordano, executive director of Giordano China, told reporters that as long as the foreign market conditions improve slightly, "We immediately reinvigorated." Ma Zhuan-an said that in the face of industry difficulties, Giordano did not lay off plans, at least hope that the company will not layoffs.

Although Giordano did not release October specific revenue data, according to its recently released third quarter report of 2008, the turnover of the Giordano brand business in the third quarter of this year increased by 25.3%, and the gross margin increased by 1%. In the third quarter, the Group’s total sales in the Mainland increased by 31.2%, and gross profit margin increased by 4.1%.

In the third quarter, including the new flagship stores in Guangzhou, Hangzhou, Wuhan and Chengdu, the company added a total of 22 stores, making the number of stores in the Mainland increased to 881 in the first three quarters. Giordano’s chairman Liu Guoquan stated in the announcement that consumer confidence has rapidly declined due to the intensification of the global financial crisis, and Hong Kong and Taiwan’s sales in October have both experienced double-digit declines compared to the same period of last year.

Investment bank continues to be optimistic

Ma Jordan, executive director of Giordano China, told reporters that the apparel industry has indeed suffered a severe setback this year. Since the Wenchuan earthquake on May 12th, consumer enthusiasm has shrunk. Of course, the Olympic Games did not bring good expectations to their own personal experience. In Beijing, Shenyang, and other cities where Olympic Games programs are held, the sales of stores there are still good, but in other cities, “many people may watch TV at home and not go to the streets.”

Giordano's seemingly tragic moves have attracted many investment banks and pointed out that there is still room for growth in the Chinese mainland market.

Investment Bank Merrill reiterated its Giordano Buy rating and maintained the target price at HK$2.11. The bank pointed out that in the third quarter and the first nine months of this year, Giordano’s retail and distribution businesses all showed significant growth. Driven by Mainland business, the gross profit rate in the first nine months rose to 51.3%. In addition, the company held cash in cash of HK$425 million. The inventory level is also healthy. It is expected that its profit for the year 2008 will reach HK$355 million.

At the same time, UBS also issued a report to maintain Giordano's international buy rating with a target price of $3. The main reason is that its mainland market is optimistic about the company's growth momentum.

According to the report, Giordano’s revenue increased by 9.4% in the first three quarters of this year, which was mainly driven by the growth of 31.2% in the mainland market and offset the setbacks in Hong Kong, Taiwan and Singapore. Ma Jordan, executive director of Giordano China, also said that Hong Kong, Macao and Taiwan were deeply affected by the financial crisis, which greatly affected the confidence of local consumers.

It is reported that Giordano's current price-earnings ratio is only 7.7 times, lower than the level during 2003 SARS period, so maintain the Buy rating. GF Securities apparel industry analyst Liu Weijun said that Giordano's return to the mainland market is the continuous expansion of the domestic market, but at the same time it is also facing increasing competition. GF Securities apparel industry analyst Liu Weijun believes that the mainland market still has room for growth, especially in the second and third tier cities. "At least in two years it will not be saturated." But he also said that many apparel brands are currently taking this path, after all, the market capacity is limited. Reporter Fang Nan

â–  Data

As of September 30, Giordano International had 1949 stores worldwide. In addition to Greater China, the company also has stores in Singapore, South Korea and the Middle East. The company employs more than 10,000 people.