HONG KONG — Trinity Limited said Friday its full-year net profit declined 42.9 percent as government austerity measures in mainland China curbed demand for its high-end menswear labels, which include Kent & Curwen, Cerruti 1881 and Gieves & Hawkes.
Hong Kong-listed Trinity, part of Fung Retailing Limited, warned it is “cautious” on the near-term outlook in China. While the economic slowdown appears to have bottomed “there is no catalyst yet for a rebound,” the company said. Still, Trinity said it is still optimistic about its long-term prospects in the country and it believes China will “fulfill its promise as the biggest luxury market in the world.”
The company’s net profit for the year ending Dec. 31 dropped 42.9 percent to 308 million Hong Kong dollars, or $39.6 million. Revenue declined 3.7 percent to 2.69 billion Hong Kong dollars, or $346 million. Revenue from mainland China dropped 9.9 percent, the company said.
“These [government austerity] reforms, together with the domestic market in its recovery stage, have had the inevitable but expected impacts on Trinity’s financial performance. Nevertheless, the group feels confident about how its business is positioned to leverage the future developments taking place in the high-end to luxury menswear sector,” the company said in a filing.
Selling and marketing expenses rose 2 percent on the year to come in at 1.28 billion Hong Kong dollars, or $164.8 million. Trinity said the bulk of the cost increase came from Gieves & Hawkes, which it acquired in May 2012. General cost increases in China also cut into margins.
Trinity ended 2013 with a total of 451 stores, 360 of which were in China. Further expansion of its network is expected to moderate as the company acknowledged that “now is not the ideal time for store network expansion” in China. It opened 48 new stores and closed 74 stores in mainland China over the past year.