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HONG KONG — Trinity Limited, owner of men’s wear brands Kent & Curwen, Gieves & Hawkes and Cerruti, reported a 43 percent drop in first-half net profit as the economic slowdown and austerity measures took a toll on sales.
Separately, the company said that it agreed to invest $15 million in British Heritage Brands, known as BHB, through a convertible loan. Under the agreement, Trinity will license the Kent & Curwen brand as licensor while BHB will run the day-to-day operations of Kent & Curwen brand in the U.S. LF USA will provide the distribution platform and back-office support.
Trinity Limited is a member of the privately held Fung Group, which is affiliated with sourcing giant Li & Fung. Trinity said the agreement is a source of potential license fee income and, if converted into equity, would entitle Trinity to a 24 percent share of BHB’s profit.
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Profit in the period fell to 150 million Hong Kong dollars, or $19.3 million, while revenues declined 2.1 percent to 1.34 billion Hong Kong dollars, or $172.8 million. Same-stores sales in Mainland China declined by 10.2 percent.
“China has been slowing down since the middle half of last year, at the same time the new Beijing leadership and austerity measures certainly have affected our business negatively so our Chinese mainland business has not been performing as well as before,” Wong Yat Ming, group managing director at Hong Kong-based Trinity, told a press conference.
Wong said that higher marketing and advertising costs, mostly in Europe — as well as last year’s disposal of some shares in a Ferragamo joint venture in Korea and Southeast Asia — further reduced profitability.
Wong said the market outlook in the greater China region remains uncertain. He also said while the company’s hiring and restructuring efforts, which have increased administrative costs in Europe, are largely complete, marketing and advertising spending in Europe would continue at the same pace.
Administrative expenses in Europe in the first half of the year totaled 251 million Hong Kong dollars, or $32.3 million, while marketing costs came to 553 million Hong Kong dollars, or $71.3 million.
In response to the slowdown in China, Trinity shut down 17 stores in China during the first half of the year. Wong said that while the total spending per customer in China has remained steady, the foot traffic or number of luxury shoppers in Chinese shopping malls has decreased.
Department stores appear to have been less affected. In big cities, Trinity’s stores tend to be located in shopping malls while distribution points in second-tier and third-tier cities tend to be located in department stores.
Overall, same-store sales in greater China declined 6 percent in the first half, dragged down mostly by sluggish Mainland Chinese sales. Same-store sales in Taiwan decreased by 6.3 percent while same-store sales increased 4 percent in Hong Kong and Macau.
Wong said Hong Kong has been more resilient because Mainland Chinese tourists have continued to flock to the city to shop because prices are lower.