Sa Sa net profits jump 41% on strong turnover

HONG KONG: Sa Sa International Holdings, a cosmetics retailer based in Hong Kong, reported yesterday that its first-half net earnings jumped 41 percent, benefiting from strong growth in turnover and gross profit margin. The company is well known for selling cosmetics at bargain prices and has become very popular with mainland visitors.

For the six months ended September 30, Sa Sa's net profits amounted to HK$123.5 million, up from HK$87.7 million a year earlier, while its turnover also increased 8.3 percent to HK$1.76 billion.

Gross profit margin for the first half rose to 43.9 percent from 42.7 percent, as the company improved its inventory management and narrowed down inventory turnover days for a better profit.

Sa Sa will distribute an interim dividend of 9.0 HK cents per share to its existing shareholders. The dividend payout ratio is around 100 percent.

Chairman and chief executive officer Simon Kwok said on Friday that the H1N1 pandemic dragged down the company's sales in May and June. However, he believes the sales in the second half will perform better than the first half.

"Up to now, we manage to maintain double-digit growth in our sales. We believe we can achieve 4 to 5 percent growth in same-store sales by the end of this (fiscal) year," Kwok said.

The company posted 2.5 percent growth in same-store sales in the first half, while the total number of transactions also leaped 7.8 percent to 5.6 million. However, average sales per transaction declined 2.5 percent to HK$243.

Kwok said the company has been focusing on promoting its medium-to-low-priced products during the past six months, as the economic recession whittled down customer spending in the retail market.

"We hope the average sales per transaction can improve in the second half, as the local economy gradually picks up," Kwok said, adding that the company will only increase its turnover through boosting the transaction and customer numbers.

Sa Sa's turnover in Hong Kong and Macao, accounting for around 79 percent of the company's total sales, rose 3.9 percent to HK$1.39 billion for the six-month period.

Turnover on the mainland, representing 2.4 percent of the total sales, jumped 70.2 percent to HK$42.2 million with 14.6 percent growth in same-store sales. The strong sales have narrowed down the loss in the mainland market to HK$10.9 million.

"We will continue to open new stores and improve product variety on the mainland. We hope the mainland market can break even as soon as possible," Kwok said.

At present, Sa Sa has around 163 retail outlets in Hong Kong, Macao, the mainland, Malaysia, Singapore and Taiwan. The company expects to operate 179 stores by the end of March 2010.

"We now have 13 stores on the mainland. We hope to have 20 stores in the market by the end of the second half," Kwok said, adding that the company is aiming to operate 40 to 50 retail stores on the mainland in the future.

Moving against the 4.84 percent drop in the benchmark Hang Seng Index on Friday, shares in Sa Sa finished up 1.14 percent, or HK$0.05, at HK$4.45.

(HK Edition 11/28/2009 page5)