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Category: Fashion

Retail News Asia is committed to providing both local and global retailers with the latest Fashion news throughout the Asian market. This on a daily base.

  • Jewellers scale down to adapt as Hong Kong loses its tourist lustre

    Jewellers scale down to adapt as Hong Kong loses its tourist lustre

    After a decade of aggressive store expansion, Hong Kong’s jewellery retailers have been hardest hit by the recent downturn in tourism, with half their revenue coming from mainland shoppers.

    Jewellers have now been forced to a adopt variety of strategies to tackle the tougher market, ranging from trying to lure local customers, cutting store sizes and expanding business overseas.

    TSL, one of Hong Kong’s largest jewellery chains, is scaling back its presence in tourist districts while setting up more small shops in local malls.

    Estella Ng Yi-kum, deputy chairman and chief strategy officer at TSL, said the rent for one store in a prime area could pay for at least two stores of the same size in a residential area.

    “Moving into residential areas enables us to provide better customer service,” said Ng, adding that growth in local stores is “much more stable”.

    After the closure of its flagship Causeway Bay store earlier this year, TSL has opened three smaller stores in Temple Mall North in Wong Tai Sin, Plaza Hollywood at Diamond Hill and Olympian City in Kowloon.

    Luk Fook, the city’s second largest jeweller, is maintaining its presence in prime retail areas, in the hope that the mainland tourists will return, while cutting the size of some stores or relocating them to secondary locations.

    Earlier this year, Luk Fook closed a store on Nathan Road, which had cost HK$2 million a month to rent. Meanwhile it opened a smaller store on the same street with the rent as low as HK$400,000.

    “The turnovers were almost the same,” said Luk Fook chairman and chief executive William Wong Wai-sheung, adding the smaller store was enough to cater for the shrinking number of mainland tourists.

    Following the logic that mainlanders have to spend their money somewhere, Chow Tai Fook, the city’s largest jeweller, has moved into both the mainland and South Korea, another emerging tourist mecca.

    It recently opened a new store in Qianhai free-trade zone in Shenzhen, offering competitive prices just slightly higher than Hong Kong. The jeweller’s mainland business contributed 56 per cent of its total revenue in the six months to September 30 this year, according to company figures.

    International jewellery brands seem to be adopting the opposite strategy, switching their existing stores to prime locations, according to a retail leasing expert.

    Joe Lin, executive director of retail services at leasing firm CBRE, said many international brands had rented stores with either better quality in terms of customer traffic and visibility, or lower rents in Causeway Bay.

    “This is a great timing” said Lin, adding that more prime store locations had become available amid the retail downturn.

    This article appeared in the South China Morning Post print edition as Jewellers forced to adapt as city loses its tourist lustre

  • Mulberry laments tough Hong Kong

    Mulberry laments tough Hong Kong

    Tepid demand for luxury products in the once insatiable Asian markets is the only blemish on a remarkable comeback by British fashion brand Mulberry.

    After a tumultuous 2015 that saw a change in leadership and a strategic U-turn on pricing strategy, luxury retailer Mulberry has posted first half results that indicate a return to stability and strategic clarity, bringing  the retailer back into profitability against a £1.1 million loss this time last year.

    Mulberry revealed overall revenue growth of five per cent and like for like sales growth of 10 per cent. UK trading was particularly strong, with same store sale up 14 per cent, including digital sales.

    However, strong store trading at home was offset somewhat by declining wholesale sales, largely due to decreasing demand in Asia.

    Wholesale performance remains a thorn in the side of luxury players, with Mulberry admitting wholesale declines of 11 per cent.

    “This could spell trouble ahead across the British luxury sector, including Mulberry,” observes Andrew Hall, consultant with retail analyst Conlumino.

    The decline in Asian sales – particularly notable in China and Hong Kong – “will remain a worrying sticking point for the likes of Mulberry and rival Burberry,” says Hall.

    “The crackdown on corporate ‘gift giving’ in China and Hong Kong has dampened demand for handbags and other designer luxury goods, as well as reducing the flow of affluent tourists from the area to international retail destinations. However, Mulberry will be hoping to renew appeal to this market in the second half of the year through the first collection produced by Creative Director Johnny Coca, to be showcased at London fashion week.”

    “Previously we have expressed concerned over Mulberry’s inability to foster a viable identity of luxury British heritage; however, the retailer has become more proactive over this half year, being keen to stress the importance of the UK factories in delivering a British product – as well as having a positive impact on gross margins. In addition, Mulberry has begun to reinforce this identity through its handbag designs; looking forward, this should be applied across the product range to strengthen a luxurious, international appeal,” says Hall.

    CEO Thierry Andretta has provided clear leadership, steering the retailer away from the inappropriate up-market prices toward more affordable price points.

    “No doubt this strategic turnaround has bolstered store performance, with consumers showing a strong preference for RRPs below £1000, which the majority of Mulberry products now have. A more sensible pricing strategy is also driving digital sales; this has proven an encouraging area of growth for the rejuvenated retailer, with digital sales up by 20 per cent and now accounting for 12 per cent of group sales.”

    Hall says despite the Asian market performance, Mulberry’s first half results paint an encouraging picture of a retailer growing on newly stabilised foundations.

    “This has positioned Mulberry for a strong Christmas period, with the nativity spoof Mulberry Miracle video having been viewed over 1.7 million times and innovative gifting packages or ‘chests’ of Mulberry products attracting attention.

    “This should help deliver a strong full year performance in 2016, although international reception to Coca’s first collection for the retailer will be critical to recouping a positive wholesale performance,” concludes Hall.

  • Mango sees potential in Philippines

    Mango sees potential in Philippines

    The recent move of international fashion retailer Mango from a space tucked inside Eastwood Mall to a bigger area in front of the shopping center was a sentimental moment for Kelly Santos, Mango Philippines country supervisor.

    “This was my base store so it’s close to my heart,” says Santos, who started as a manager of the shop in June 2010, then moved up to merchandising, then to her current post for the last two-and-a-half years. “But we’re just relocating so it’s very exciting.”

    Santos’ steady climb in the company mirrors Mango’s own growth in the Philippines’ thriving retail industry.

    Since its first store in Robinsons Ermita in 1999, the boutique now boasts of 34 standalone stores spread across the Philippines-that’s more than Hong Kong’s 4, Singapore’s 16, and the US’s 7. The variants are expanding, too: Mango Woman is available in 26 stores, Mango Man in 7, the accessories line Mango Touch and Mango Kids in 5 each, and Mango’s athletic apparel is found in the brand’s boutique in SM Mall of Asia.

    Measuring 650 square meters, the Eastwood Mall boutique is an impressive affair, designed to heighten the shopping experience with its lighting, furniture, mannequins, visuals and displays.

    Still, there’s an even bigger branch in the offing.

    By the end of the year, Mango’s Megamall branch will be a multilevel store with a total floor area of 1,000 sqm. This is the second multilevel store after Mango in Ayala Malls Cebu.

    “The expansions are part of Mango revolutionizing itself and adapting to the needs of the market,” says Santos of Mango’s growth even with the presence of retail rivals. “With the challenge of competition, we remain strong because we go with the flow, bringing Mango to where the people are.”

    Collections that can be worn season after season also explain why this fast fashion brand is a favorite of both style-savvy and smart dressers. Loyal Mango patrons know that a basic top or bottom is a durable investment that works well when combined with other clothing labels. Even this season’s trend-Boho Chic, as modeled by brand ambassadors-of-the-moment Cara Delevingne and Kate Moss-offers pieces that won’t appear dated post Autumn/Winter 2015. “I would put my name on the line to say that you can still wear them after many years,” swears Santos. That even goes for the pant silhouette du jour, flares. “We were just talking about that!” exclaims the petite store supervisor with a laugh. “Actually, flared pants were the trend three years ago and I remember buying a pair from Mango. I thought I’d never use them again, but now I’m thinking of reviving my pair.”

    The brand has had a connection with the Philippines even before its boutiques reached these shores. Founded in 1984 in Spain by Turkish emigrant brothers Isak and Nahman Andic, Mango was named after the Philippine mango, whose taste so captivated Isak when he sampled the fruit during a trip to the country many years ago. The name also stuck because it is pronounced the same way in any language.

    Fifteen years later, that connection remains stronger than ever. Two years ago, the notoriously low-profile and media-shy Isak Andic visited the Philippines for the first time since the country’s stores became operational. While Mango Philippines executives were surprised at news of his arrival, “we also felt important,” says Santos. “In Asia, they know that the Philippines is full of potential. There’s even talk that he may come back soon, which really says a lot.”

    As such, Mango’s principals are keen on getting Filipinos’ opinions on everything, from the choice of brand ambassadors to the type of clothes they see on the shelves. “They always, always ask us, ‘What does your market need?’” says the country store supervisor. The short sleeve shirts that appear on the racks of Mango Man this Autumn/Winter, for instance, are a product of research from last season as well as feedback from Filipino execs.

    Evidently, this explains Mango’s staying power against equally enticing rivals.

    By giving the market exactly what it wants—from specific merchandise to stores that excite the senses—the brand will remain a constant in the malls, and in people’s wardrobes, for years to come.

    “Even with the competition,” says Santos, “we know our customers are there. They will always be back.”

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  • Madura experiments with first omni-channel retail

    Madura experiments with first omni-channel retail

    Apparel retailer Madura Fashion & Lifestyle, part of Aditya Birla Nuvo Ltd on Saturday launched a new digitally integrated store under its flagship formal wear brand—Van Heusen—indicating the two-decade-old retailer’s push to morph into a more tech-savvy brand at a time when shoppers are switching to shopping on the Internet.

    With sales staff equipped with tablets and virtual fitting rooms, the store is the company’s first attempt to allow shoppers to use touch-enabled screens to shop and pay for garments. The store also allows for shoppers to order unavailable inventory to their homes by linking the company’s in-house web-portal Trendin.com to the store.

    Changing customer expectations couples with technology are influencing consumer choices far more today, said Vinay Bhoptakar, chief operating officer, Van Heusen, at the retailer’s store launch in Bengaluru.

    The store—called Van Heusen Style Studio has been in the works for over a year. It will offer more expensive collections and a wider range. Built at twice the cost of a regular Van Heusen store, Bhoptakar said, five more such stores are underway in Delhi and Mumbai.

    The retailer has partnered with Fitch Retail in Singapore to draw up the concept, with virtual fitting rooms sourced from Experiential Design Lab.

    Diluted version of this store will be planted across the brand’s existing 275 stores, added Bhoptakar, indicating that existing stores will borrow technology elements of the new format in a limited way. Madura’s other ready-to-wear apparel brands including Allen Solly, Louis Philippe could too borrow from this format.

    Taking cues from a surge of sale fashion goods on the Internet, most large traditional retailers in India are making efforts to venture in to online retail even as they try to preserve footfalls at brick and mortar stores. Most have found a midway in the so called “omni-channel” retail format that allows shoppers to seamlessly shop for online and offline inventory both within and outside the store.

    Aditya Birla Group too has been stepping up efforts to catch shoppers online where more Internet focused retailers such as Flipkart and Snapdeal are biting in to consumer’s share of wallet.

    In October this year the group launched its own fashion marketplace—Abof.com—privately held by chairman Kumar Mangalam Birla in his personal capacity. In 2013, Madura Fashion & Lifestyle launched Trendin.com—an in-house online portal—retailing its brands Allen Solly, Peter England, Louis Philippe among others.

    Bopatkar, however added that such evolving retail stores are “not a reaction to e-commerce but a reaction to changing consumer behaviour.” As a result, “the physical store will always be there, but role of the physical store has to evolve,” he added.

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  • Burberry offering ‘biggest discounts ever’ in Hong Kong as brands try to pull back shoppers

    Burberry offering ‘biggest discounts ever’ in Hong Kong as brands try to pull back shoppers

    British luxury brand Burberry has joined Prada and Gucci in offering discounts of as much as 50 per cent in its Christmas sales, the steepest reductions since the Individual Visit Scheme for mainland tourists was launched in 2003, underlining the depth of the retail slump in Hong Kong.

    The sales started two days ago, a staff member at Burberry’s Causeway Bay store told the Post. She said only around 10 types of handbag and some clothing items are carrying the discounts.

    “I haven’t seen such a deep discount since I started working here” she said , adding the biggest was 30 per cent in the past.

    Burberry launched its annual Christmas sales in late November with initial discounts of as much as 40 per cent on selected items, rising to 50 per cent this week. Its iconic small Orchard leather bag, which was priced at HK$16,000, is now selling for HK$8,000.

    “A 50 per cent discount is unusual for big luxury brands like Burberry” said Hayman Chiu, associate director at Cinda International, adding that it was the biggest price cut for Burberry that he could remember since the visitor scheme launched.

    “The whole luxury industry is doing the same thing right now,” he said, referring to the similar discounts by Prada and Gucci .

    Three American brands, Marc by Marc Jacobs, Michael Kors and Coach, are currently offering discounts of as much as 50 per cent. European brands such as agnès b, Longchamp and Balenciaga have reductions of 40 per cent.

    The discounts for most of those brands are deeper than last year, according to sales staff at the Sogo department store.

    Brands are also resorting to discounts after falls in the Japanese yen and euro this year prompted mainland shoppers to avoid Hong Kong.

    The strong Hong Kong dollar, which is pegged to the US dollar, has made luxury goods more expensive than in Japan and Europe, said Mariana Kou, retail analyst at brokerage CLSA.

    However, a deeper discount isn’t a always a draw.

    Louisa Cheung, a local shopper in the Burberry store in Causeway Bay yesterday, ended up buying nothing. “Deeper discounts only work for customers who are loyal to the brand,”she said.

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  • Spykar denim plans 250 new stores

    Spykar denim plans 250 new stores

    Spykar, an Indian-founded denim brand, is planning to open 250 stores over the next five years under a franchise program.

    According to Franchise India, Spykar currently operates 200 exclusive brand outlets across India targeting the youth market.

    Meanwhile, the company is also exploring opportunities for international expansion.

    Spykar COO Sanjay Vakharia told Franchise India the brand has operated stores in London and Melbourne, Australia, for three years.

    “The experience gained during these overseas ventures is invaluable and will help us for future propositions. We will explore more global markets.”

    Grounded in denim, the brand has expanded into casual clothing including t-shirts, shirts and winter clothing. Womenswear and accessories are likely to be added to the portfolio “in the near future”.

    Under its Indian franchising program, the brand will open new stores at a rate of about one a week, focusing on tier 1, 2 and 3 cities: Noida, Kolkata, Pune, Mumbai, Jamshedpur, Indore, Calicut, Kota, Bangalore, Hubli, Coimbatore, Vadodara, Lucknow, Ghaziabad, Ranchi, Jaipur, Alwar, Udaipur, Jalgaon, Chandrapur, Satara, Trivandrum, Thrissur, Kottayam, Kannur, Vizag, Vijaywada, Guntur, Nellore, Rajahmundry, Tirupati, Kakinada, Chennai, Madurai, Bilaspur, Ahmedabad and Hyderabad.

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  • M&S opens new store in China

    M&S opens new store in China

    Marks and Spencer has opened its first store in Beijing. In 2014 the high street stalwart earmarked China, Russia, India, the Middle East and Western Europe for international expansion. Chief Exec Marc Bolland cited plans to open 250 new stores overseas in three years. The aim was to boost international sales by a quarter and increase profit up by 40%.

    Patrick Bousquet-Chavanne, M&S’s Executive Director of Marketing & International, told Reuters the company was still committed to both Russia and China but that those overseas targets were now unattainable. The plans changed.

    “We’re looking at places which are very much ‘tier 1’… where you have an upper middle class consumer base… where we will do well even in the context of a slowdown in the economy,” Bousquet-Chavanne said in September.

    The new store in Beijing follows a change in company policy which outlines the closure of stores in ‘secondary cities’ across China, and a focus on flagship stores in major cities instead.

    The 1,500 sq m store opened at The Place shopping centre, and will sell selected food and drink as well as M&S clothing.

    Although this will be its first venture into Beijing, M&S has 10 stores in the Shanghai region and 20 in Hong Kong. Its empire covers over 1,300 stores, 852 of which are in the UK.

  • Lululemon needs “to work harder”

    Lululemon needs “to work harder”

    Lululemon’s third quarter sales performance – measured on a total basis – was solid with total company revenues up by 14 per cent.

    This was mostly driven by the addition of 52 new stores, with the extra 142,000 sqft of selling space making a good contribution to the top line numbers.

    However, more worryingly the growth contribution from existing physical stores was nonexistent, and while the contribution from direct sales looks reasonable the growth rate is somewhat down on previous quarters.

    As with other retailers, the strong dollar is partly to blame for this lacklustre outcome; indeed, on a constant dollar basis total comparable sales were up by six per cent, with same store physical growth also up by six per cent. That noted, even with exchange rate fluctuations removed, growth is noticeably slower which, points to a much wider set of issues.

    Foremost among these is the rise in competition from both specialist and generalist players. While Lululemon has a following of dedicated fans it also relies on more occasional purchases from those who are somewhat less loyal to the brand, and it is here that the company has lost traction over the course of this quarter. Although arguably Lululemon still has a distinct and well positioned brand, there is no doubt that a more crowded playing field has made growth much harder to come by.

    The impact of the more competitive arena is further exacerbated by the company’s own push into direct selling. While this has been a great success, with online now accounting for 18.6 per cent of all revenue, it has also cannibalised some trade from stores and, with higher fulfilment costs, has been slightly margin dilutive.

    The problem with all of these dynamics is evident in the bottom line performance. Notably, Lululemon’s net income for the quarter fell by a fairly sharp 12.1 per cent and operating income was down by a shade under 16 per cent. Understandably, some of this can be attributed to the higher investment costs as new space opens, but most of it is down to the deterioration in the productivity of the existing operation.

    One of the solutions to the current squeeze is arguably greater product innovation which would stimulate customers into buying new product and allow Lululemon to ease up prices. However, while some movement on this front is apparent, Lululemon has lost much of its edge, and in comparison to a player like Under Armour its product development looks positively glacial.

    In light of the relative lack of innovation it is discouraging to see the recent attempt to hike some prices, which is something the market will not likely bear given current competitive conditions. It also had the effect of upsetting loyal customers who saw little justification for the increases and therefore viewed them as being unreasonable. Given the current struggle for growth, alienating core consumers is arguably the last thing that Lululemon should be doing.

    Despite the challenges, the one area of opportunity is the push into more embryonic areas like mens and teens. However, while Lululemon has made some good progress, the brand still has a somewhat limited appeal to many of these constituencies, mainly because it is strongly associated with its heritage of female fitness. Certainly, it is proving much more difficult for Lululemon to move into mens than it is for Under Armour to move into womens.

    Despite the challenges, the tailwinds provided by continued interest in athletics and fitness – which shows no signs of slowing down – will likely to help cushion Lululemon’s problems. However, the company now needs to work much harder if it is to keep in good shape in what is now a much more competitive market.

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  • Tomei sells 45% stake in Hong Kong unit to tap local expertise

    Tomei sells 45% stake in Hong Kong unit to tap local expertise

    Tomei Consolidated Bhd said it has disposed of 14.49 million shares that is equivalent to a 45% stake in its wholly-owned subsidiary Wealthy Concept Ltd (WCL) for HK$4.5 million (RM2.5 million), cash.

    WCL is a Hong Kong-based company that is involved in the distribution and retail of jewellery. The stake was sold to two Chinese citizens Wang Guang (9.66 million shares; 30%) and Li Yi (4.83 million shares; 15%).

    In its filing with the exchange, Tomei said the sale was to tap on the local expertise of its new shareholders in the retail of gold and jewelleries business in China.

    It added that it intends to utilise the proceeds from the disposal as working capital.

    Following the disposal, Tomei will be left with 17.71 million shares or 55% in WCL.

    “The proposed disposal is not expected to have any material effect on the earnings, net assets, share capital and the substantial shareholdings of Tomei for the financial year ending Dec 31, 2015,” said the company.

    Tomei closed 1 sen or 2% lower at 49 sen today, bringing its market capitalisation to RM69.3 million.

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  • Uniqlo strengthens Toray partnership

    Uniqlo strengthens Toray partnership

    The partnership which pioneered Heattech and Airism garments have forged a new expanded relationship they say will create “a new industry for the future”.

    Fast Retailing’s flagship Uniqlo and Toray Industries first joined hands 10 years ago aimed at developing technological solutions to make clothing functional rather than just practical – and provide the Japanese fashion giant with a point of difference over fast fashion rivals.

    Uniqlo’s signature Airism garments are meant to be worn beneath any ensemble to keep you cool and dry, making heat and humidity more bearable with properties such as absorbency, breathability and odour control. Heattech garments come with features designed to make it the most comfortable innerwear, including sweat-wicking, quick-drying, anti-odour and anti-static features.

    The most recent seasonal Heattech lines contain camellia oil moisturiser to keep the wearer’s skin soft and supple in dry weather.

    In the new five year third stage of their working partnership, Uniqlo and Toray will work together to:

    Accelerate globalisation and digitalisation to create a new industry by:

    • Realising an end-to-end business model by utilising the Internet of Things (IoT).
    • Further reducing production lead time.
    • Further increasing globalisation of production sites and locations.
    • Optimising production in each location.
    • Expanding production sites to support business growth in Greater China (China, Hong Kong and Taiwan).

    Maximise LifeWear that is made for all by:

    • Improving comfort and functionality of all current products.
    • Adding value to products by conducting research and development.
    • Developing new sportswear to enhance daily lives.
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  • The World’s Biggest Fashion Retailer is Betting Big on China

    The World’s Biggest Fashion Retailer is Betting Big on China

    Spain’s Inditex, owner of the Zara chain and the world’s biggest fashion retailer, is optimistic about long-term growth in China despite the slowing economy, as demand for its affordable fashion stays robust.

    Inditex, whose Zara brand has lured shoppers this season with a minimalist straight-cut look, teaming muted colors with ankle boots and trousers, makes about 7 percent of its sales in China, analysts estimate.

    Western luxury brands like Burberry and Hugo Boss are suffering from cooling Chinese demand, but mid-market names like Adidas and Zara are faring better.

    “We have no doubt that in China the fashion appetite is large, our brands are better and better known and we are still feeling very optimistic (over a five-year view),” Chief Executive Pablo Isla told analysts on Thursday.

    The group made a sprightly start to the Christmas season as its on-trend offerings allowed it to adapt better than rivals.

    Sales from Nov. 1 to Dec. 3 rose 15% in local currencies, suggesting a slight slowdown in same-store sales from the previous three months. But analysts said it was still a strong performance given rivals like Top Shop have had a slow start to Christmas trading due to mild weather.

    “We can say that Inditex is trading just as strongly in the fourth quarter to date as it did in the third,” Societe Generale analyst Anne Critchlow said.

    In the nine months to end October, net profit rose by a fifth to 2.02 billion euros ($2.2 billion) on sales up 16% to 14.7 billion.

    Isla said newer brands like Zara Home, Bershka and Stradivarius had performed particularly well.

    Gross margin, a closely-watched measure of profitability, slipped slightly to 58.8%, as the strong dollar pushed up prices of garments sourced in Asia, though this affects Inditex less than its peers.

    Inditex sources more goods in or near Europe, helping it adapt more quickly to fashion tastes and speedily deliver new ranges.

    Inditex shares, up 37% this year, were down 1.5% by 1037 GMT, versus a 0.7% fall in the European retail sector.

    Many market watchers have flagged the rich valuation of the stock, trading at around 34 times 2016 projected earnings, according to Reuters data, versus 24 times for rival Hennes & Mauritz hmrzf .

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  • Prada Philippines re-opens expanded Makati boutique

    Prada Philippines re-opens expanded Makati boutique

    Prada Philippines has reopened its high profile boutique in the Greenbelt Ayala Center in downtown Makati, Manila.

    The expanded and renovated store inside the prestigious mall was designed by architect Roberto Baciocchi, covers a total area of approximately 200 sqm on a single level. It houses women’s and men’s leather goods, accessories and footwear collections.

    pradaThe high-impact external facade is composed of an interplay of light-boxes, completed by a backlit white canvas curtain enclosed in a crystal box. The internal facade echoes the motif of the exterior and features two large entrances and a series of display windows.

    The first entrance, defined by the signature black-and-white marble chequered flooring – a legacy of Prada’s identity worldwide – opens up on an area dedicated to the women’s leather goods collections.

    A portal leads to a second space, where the women’s footwear collections is displayed. The entire area devoted to women is characterised by green fabric- clad walls with cut-in polished steel and crystal display niches. Steel and crystal tables with coloured display shelves and green velvet sofas complete the furnishing.

    The second entrance and the space dedicated to women both lead to a regularly-shaped area housing the men’s leather goods and footwear collections. Ebony floorboards and walls, crystal and polished steel display cases and chocolate brown carpeting define the space. Display counters with coloured saffiano leather detailing and light coloured leather sofas enhance the atmosphere.

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  • Massive loss puts J Crew on the brink

    Massive loss puts J Crew on the brink

    As its latest set of results attest, J Crew is a mess.

    Not only have sales fallen across the board, but the drops are significant and come off the back of declines in the prior year.

    Even the relatively small Madewell division, which has traditionally performed well in sales terms had a poor quarter, with comparable numbers rising by a slim one per cent.

    Profitability, which was already lacking, has deteriorated further with a net loss of just shy of $760 million racked up over the quarter; this now brings the company’s total losses so far this fiscal year to an eye watering $1.2 billion. This performance comes on top of a balance sheet that is already weak and weighed down by $1.5 billion of long term debt.

    There is now a very serious question mark over the firm’s survival and it is likely that lenders may seek to take control if performance does not improve in the vital fourth quarter and beyond.

    Rebuilding the sales line after a series of fashion missteps is now looking like an insurmountable task. Many customers once loyal to J Crew defected elsewhere following the company’s move away from the classic, preppy basics that were once its heritage, and it is now proving extremely difficult to win them back.

    This is not helped by the still fairly premium price J Crew expects its customers to pay; given the brand has lost so much of its equity, and given that today’s more democratic fashion marketplace abounds with retailers selling on-trend, low-priced basics, this position is simply not tenable.

    In a sense, J Crew and its management are not sufficiently humble about the brand’s current status and are rather divorced from the realities of the retail marketplace. Nowhere is this truer than in the international expansion efforts where, for example, products in its UK stores often cost more in pounds sterling than they do in dollars in the US – a significant uplift over and above that accounted for by the UK’s higher sales tax rate.

    In today’s interconnected, digital world where prices can easily be checked on smartphones while standing on the shop floor, such a policy does nothing but alienate and annoy customers. And even without this comparison, by UK standards prices are highly uncompetitive for the type of product J Crew sells.

    To be fair some efforts have been made to respond to price sensitivity with the launch, for example, of the factory outlet Mercantile stores which the company has put into mainstream malls. However, as sensible as this may be, it does little to address the problem with the core J Crew brand.

    J Crew is now pinning its hopes on a better holiday season; however, this will not mark a turnaround in the company’s fortunes. The earliest possible date for a change is spring of next year when the first collection designed by Creative Director Somsack Sikhmounmuong will hit stores.

    Even if this is a hit, J Crew will still only be in the foothills of the mountain it has to climb to restore the company to financial stability.

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  • Moiselle flies in customers as sales slide

    Moiselle flies in customers as sales slide

    Hong Kong luxury fashion retailer Moiselle has revealed a raft of innovative strategies to restore flagging sales.

    Hit by a $31.9 million loss for the first half of the trading year due to declining spending by Mainland Chinese tourists, Moiselle is introducing new ranges and even flying in loyal customers for exclusive product displays.

    The company has reigned in its store openings and is putting the squeeze on landlords to reduce rents.

    Last week Moiselle revealed its sales had fallen by 21 per cent to $161.2 million mainly due to weak consumer sentiment and sluggish retail sales in its Hong Kong home market, which accounts for 55 per cent of its turnover. Gross margin fell from 82 per cent in the first half of last year to 76 per cent in the latest period.

    The group operated 92 retail stores and counters in Hong Kong; first- and second-tier cities of China; Macau, Taiwan and Singapore as at September 30 – three fewer than at the end of March. It closed five stores in hong Kong during the six month trading period.

    Moiselle – which sells under the Moiselle, Mademoiselle, Coccinelle and French-influenced Germain brands – has shifted focus to a more tailor-made sales model in Hong Kong, targeting members of its VIP customer club, and has formed partnerships with several Mainland Chinese online shopping websites.

    The organised shopping visits by customers from Mainland China, Taiwan and Singapore to its product showrooms in Hong Kong target its most loyal customers with high spending power. The tours began in May and started generating income in July.

    Meanwhile, Moiselle forged ahead with a strategy of diversifying its product offer to target different segments of the high-end and upper middle markets for women’s fashion apparel and accessories. It expanded its Moiselle and Germain ranges into menswear. It launched European accessories labels Sequoia and Coccinelle into the apparel market through exclusive distribution agreements to add impetus to its business development.

    In its stock exchange filing, Moiselle said it did not expect Hong Kong’s retail market to turn around “any time soon”.

    “China’s economy has shifted to a lower gear and the growing trend towards a higher proportion of the Mainland Chinese visitors with weaker spending power in Hong Kong seems irreversible. Moreover, the Hong Kong dollar, which is pegged to the greenback, is poised to enter a phase of appreciation against many other currencies as the US Federal Reserve Bureau looks set to raise the benchmark interest rate in the foreseeable future. These developments are likely to weigh on both the shopping tourism and average purchase value in Hong Kong, where the group derives most of its revenue.”

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  • Modern Beauty Salon Holdings posts profit plunge

    Modern Beauty Salon Holdings posts profit plunge

    Modern Beauty Salon Holdings has reported an 87.4 per cent plunge in first half profits as consumers restrain their discretionary spending.

    Modern Beauty runs 42 service centres in Mainland China, Hong Kong and Taiwan, 16 in Singapore and three in Malaysia. The company’s 17 retail stores trade under the banners Pen and Be Beauty Shop across Hong Kong, Kowloon and the New Territories.

    Modern Beauty Salon

    Group revenue across the markets fell 12.2 per cent to HK$402.7 million year on year, while gross receipts from the sale of prepaid beauty packages decreased from $387.5 million to $350.4 million. That produced a profit attributable to shareholders of just $5.7 million, compared with $45.5 million for the same period last year.

    The company said a volatile financial market and weakened Hong Kong economy made people more conservative on their spending.

    “Our beauty, slimming and wellness service business in Hong Kong was inevitably affected. Nevertheless, leveraging on our excellent service management that facilitate greater quality assurance, our management is confident of the further prospects of our business.”

    The company says despite the retarded economic growth in Mainland China, it still believes the beauty, slimming and wellness market there will continue to prosper with a growing demand because “as a larger portion of the population moves up to the bourgeoisie”.

    “Our brand name has secured a presence in the Mainland China with a solid foundation that we have established for years in Beijing, Shanghai and Guangzhou. Plans to open more stores in the Mainland China are afoot.”

    In Singapore and Malaysia, receipts from sales of prepaid beauty packages amounted to $37,768,000, while revenue from services rendered amounted to $55,673,000, down 35 per cent and 36.6 per cent respectively.

    “The drops are mainly due to the new government policies in Singapore and Malaysia. For Singapore, from June 2015, if a local person’s aggregate interest-bearing outstanding balance on all credit cards and unsecured credit facilities exceeds 24 times his monthly income for three consecutive months, his credit lines will be suspended. This means that he will not be allowed to charge new amounts to his existing credit cards and/or unsecured credit facilities. For Malaysia, from April 2015, a GST of six per cent was imposed on local services providers, including beauty services. These policies have hurt the local consumption sentiments significantly.

    “The group will continue to carry out its local business development prudently and we believe that the local people will accustom to the new policies and the consumption sentiments will recover as time goes by.”

    Modern Beauty says it plans to launch an eCommerce website during the next six months.

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