Avoid Giordano Competing With Zara And H&M?

Giordano international knows that its competitors in the first tier cities such as H&M and Zara have turned to less competitive three or four tier cities for development opportunities.

Facts have proved that after a series of strategic adjustments, Giordano's international success in a new way and the main line of attack on the three or four tier cities has hit bottom and rebounded.

According to the latest performance report released by HK: 0709 today, group sales rose by 13.4% to HK $1 billion 457 million in the three months to March 31st, and gross profit increased 12.5% to HK $847 million compared with the same period last year. The revenue from e-commerce channels rose 44.6% to HK $81 million in the same period of March 31st.

The report shows that, in the mainland of China, Giordano's international sales have maintained momentum of growth. The channel of electric business and franchising business have been on the right track. The comparable sales growth of the outlets has reached 16.7%. In Hongkong and Macao, the comparable sales growth of Giordano has increased by 9%.

During the period, the core brand Giordano's revenue increased by 15.1% compared to the sales increase, accounting for 86.5% of the total sales; the children's wear brand Giordano Junior continued to record a strong performance, which was 26.9% higher than the sales growth.

The sales of brand Giordano Ladies increased by 6.3% compared to that of sales.

The picture shows Giordano's main performance data for the first quarter.

By Region:

Sales in mainland China rose 9% to HK $378 million, up 10.8% from the same period last year, mainly due to Giordano's electricity and franchising business in mainland China during the period.

Sales in Taiwan increased by 27.2% to HK $201 million compared to the same period last year. The performance of the region has rebounded since the second quarter of last year. At the same time, the strong growth of the creative marketing plan and the business channel business has promoted the sales of comparable stores in the region by 19.6%.

Sales in Hongkong and Macao increased by 3.8% to HK $248 million compared to the same period last year, which is 9% higher than that of store sales, but the growth was offset by a poorly performing store closed during the period.

Sales in other parts of the Asia Pacific region surged 21.6% to HK $422 million, mainly due to the expansion of the group's business in Indonesia and the Vietnam business acquired in July last year.

Sales in the Middle East were also affected by value-added tax and new policies in the United Arab Emirates and Saudi Arabia, which fell 8.8% to HK $134 million compared with the same period last year. The Group expects sales performance in the region to further slow down with the coming Muslim festival.

At present, Giordano international has 2414 sales outlets in 30 countries in the world, of which 1271 are independent stores.

Giordano international was founded in 1981. It was listed in Hongkong in June 1991. Its brands mainly include Giordano, BSX, Giordano Junior and Giordano Ladies. The group entered the mainland market in August 1992 and is China's first casual wear retail chain brand.

Thanks to the ultimate pursuit of quality, Giordano quickly gained recognition from the market and consumers, expanding its sales network and once becoming the best selling casual wear group in Asia.

However, in recent years, the global apparel retailing industry has been hit hard. With the change of Chinese consumer habits and the aging problem of traditional apparel retailers, the lack of individuality and lack of publicity has made it increasingly difficult for clothing brands to get recognition from younger generation consumers.

In order to find more opportunities, Giordano international chose to occupy different subdivisions with multi brand matrix.

Giordano Ladies and high-end men's wear Conceptsone, the Giordano Women and Giordano Men of the popular line, Giordano Jurnior of the children's wear market and BSX of the street trend.

Some analysts pointed out that although the consumption of local residents in Hongkong is not weak, it is the fastest shortcut to expand the mainland market.

However, Giordano, once positioned as the fashion image of post-80s consumers, is completely crowding out in China's second tier cities by ZARA, H&M and UNIQLO.

In the competitive environment, Giordano international has chosen to start from the three or four line cities that have not yet been fully explored, and adopt a two pronged solution of e-commerce and franchising.

The group pointed out that China's mainland market is large and sales in different regions are different. Through this mode, a more flexible sales strategy can be formulated, such as allowing local franchisees to manufacture products for sale locally under the licensing agreement.

Mark Tanner, founder of Digital Research Institute, said Giordano international knew that its competitors in the first tier cities were not able to compete with H&M and Zara. Instead, it turned to less competitive three or four tier cities to seek development opportunities. Although franchising could reduce risk to a certain extent, the risks remained great.

Under the prudent and orderly expansion plan, Giordano has become one of the few listed group of Hong Kong funded apparel brands that has so far been robust.

Looking back over the past ten years, after the 2008 financial crisis, Giordano's sales in 2009 plunged 16% to HK $4 billion 233 million, and then recovered in 2011. However, influenced by a series of pformation and customs adjustment measures, Giordano's sales performance has been in a more stable form in the past four years.

The picture shows Giordano's main performance data in the past ten years.

According to fashion headline data, in the 2017 fiscal year ended December 30th, Giordano international sales increased 5.2% to HK $5 billion 412 million, about 4 billion 380 million yuan, and net profit rose 15.2% to HK $500 million, about 404 million yuan, and 59.5% gross profit margin.

In view of the double digit growth of group sales and gross profit in the first quarter of this year, analysts expect Giordano's international performance to achieve a new breakthrough this year.

In contrast, the Esprit parent company, also listed on the Hong Kong stock exchange, is still in the throes of pformation.

According to the data, in the first half of December 31st, the group's sales fell 3.4% to HK $8 billion 39 million, a net loss of HK $954 million, and a net profit of HK $61 million for the same period last fiscal year.

Si Jie universal said that the loss was mainly caused by the sharp decline in the performance of Esprit in mainland China in recent years and its influence on the retail distribution channels.

Fashion Retailing

In the ever-changing environment, the business environment of the group in the second half of the 2018 financial year is still very challenging and its future performance is full of uncertainties.

In order to get out of the mire of achievement as soon as possible, Esprit executives are facing a new round of shuffling.

Si Jie global announced on Monday the president of the Rafael Pastor Espuch outgoing group product, and the original CEO Jose Manuel Mart Nez Nez Guti rrez Ma Hao Si will also leave.

In just over a month, two executives from Zara have left, and Esprit, who is no longer in sight, seems to have finally accepted the fact that fast fashion Zara has failed.

Unlike Esprit's blind imitation of Zara's pformation, Giordano international is ready to move forward at its own pace, with its vision for emerging markets with huge growth potential.

Liu Guoquan, chairman and chief executive officer of the group, said at the annual performance conference that the new market will be expanded this year and 100 new branches are expected to be opened this year.

He further pointed out that in the future, in the Middle East, in addition to the possibility of developing e-commerce business, it is also changing the way of direct pfer to India and Pakistan as a pilot. In the next two or three years, it is hoped that the sales and profits of the region will be greatly improved.

Luo Xuewen, executive director of Giordano international, said earlier that the group would further move beyond the Asia Pacific region.

Expansion has been signed with franchisees from Mongolia and France.

He revealed that Giordano opened its first physical store in Paris in the fourth quarter of last year.

Giordano's International (HK: 0709) stock price has risen 21.45% since the beginning of this year, and its market value is about HK $7 billion 740 million, a record high of nearly 4 years.