Veeko, Wanko and Colourmix parent finds Singapore tougher than HK

Hong Kong-headquartered fashion retailer Veeko – the Wanko and Colourmix parent – has found Singapore more challenging than its home market.

For the six months to September 30, Veeko International Holdings recorded a turnover of

HK$1.029 billion, down 3.5 per cent year-on-year.

Its cosmetics business, the Colourmix and Morimor stores, sales were stable, down by just 0.1 per cent at $828 million, accounting for 80.5 per cent of the company’s business, compared with 77.6 per cent last year.

That highlights the core of the company’s problem – its fashion stores, trading under the Veeko and Wanko brands – which recorded a 16.1 per cent decline in sales to $200.7 million.

Sales in Singapore, where it closed one store and now has eight, plunged 23 per cent year-on-year.

Yet in Hong Kong and Macau, where the overall decline in retail sales during the half year was nudging double digits, sales declined by a more modest 7.6 per cent and the gross profit margin rose marginally from 71.8 per cent to 72 per cent. It added three stores during the period, taking the network to 83.

In Mainland China, fashion sales declined 14.3 per cent and it closed three stores, leaving a net 38.

Colourmix holds its own

Beauty is the powerhouse of the Veeko business. The company has 87 Colourmix stores – five more than at the same time last year – of which 82 are in Hong Kong, four in Macau and one in the mainland.  In August 2015, the group launched another cosmetics store brand Morimor, with seven now trading in Hong Kong. This brand is positioned as offering “high-quality trendy skin care and cosmetics products by integrating global premier skincare and beauty concepts, with diversified products covering skin care, fragrance, make-up, hairdressing, body care and cosmeceuticals and health food”.

Veeko chairman Johnny Cheng Chung Man says the South Korean series of cosmetics and beauty products are very popular among young customers.

“In addition, the professional beauty consultants offer customised personal services and consultations on skin care so that customers can enjoy the relaxed and pleasant experience of beauty services.”

The gross profit margin of the cosmetics business for the period was 32.4 per cent, down 3.3 percentage points year-on-year. The cosmetics business for the period recorded a segment profit of HK$1.319 million, representing a significant decrease of 97.7 per cent.

“As a result of the rapid growth in the cosmetics business experienced in the past consecutive years, a considerably high base has been accumulated. With the continuously weak retail market and overall consumption environment in Hong Kong as well as a drop in the number of visitors to Hong Kong during the period under review, it was necessary for the group to offer

several promotional discounts and organise marketing activities to stimulate sales, which

led to a reduction in gross profit margin and a significant decrease in segment profit as

compared with the same period last year,” said Man.

Looking forward

Man says looking forward, the group expects the challenges faced by the retail business to continue.

“The retail environment in Hong Kong is anticipated to remain severe while a cautious consumption sentiment prevails. The group will continue to enrich its product portfolio of cosmetics products, increase trendy beauty products with exclusive distributorship, conduct staff training on providing quality professional services, and strengthen its internal consolidation.”

Man said the fashion retail business will continue to focus primarily on the Hong Kong and Macau market. “To cope with the stagnant retail environment as well as to meet constantly changing needs in the market, the group will continue to optimise product designs and improve customers’ shopping experience. As for the overseas markets, the group will continue its cautious control on its overseas stores portfolio. Underperforming stores will be closed down

further to focus its business on profitable stores.”

In Hong Kong, given the slowdown in the retail market and a decline in rental charges for stores located in prime districts, the enhanced bargaining power of the retailers will therefore help reduce the rental pressure for stores with expiring lease terms, he said.

“As the group will close down certain stores with low profitability and open new stores in prime locations, additional rental saving will be expected in the near future.”

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