HONG KONG — Men’s wear retailer Trinity Ltd. posted a 47.3 percent drop in net profits in the first half amid ongoing economic slowdown in China.
The Hong Kong-based company, which manages five brands including Cerruti 1881, Gieves & Hawkes and Kent & Curwen, reported net profits in the first six months of the year of 79 million Hong Kong dollars, or $10.2 million. Trinity said that more than 90 percent of the profit drop was due to the decline in revenue and a swing in unrealized foreign exchange gains and losses. Revenues declined 5.9 percent to 1.26 billion Hong Kong dollars, or $162.5 million.
The “Chinese mainland is having slower growth than we anticipated. There is a frugality drive and we’re seeing an increase in costs both in rents and in personnel,” said Richard Cohen in his first press conference as Trinity’s new chief executive officer. Cohen, who started at Trinity in May, has almost 40 years of experience at brands and retailers including Burberry, Ermenegildo Zegna, Saks Fifth Avenue and St. John.
Trinity reduced the total number of stores in Greater China by 18 during the first half of the year, while same-store sales in mainland China declined by 6 percent. Sales were flat in Hong Kong and Macau and increased by 2.9 percent in Taiwan.
Cohen said he expects the “headwinds” in the Chinese market will continue but nonetheless anticipates that 2015 and 2016 will be much better years for Trinity as the company adapts. He noted that the company has been working on product development and adjusting merchandising to market preferences in Northern, Southern and Central China.
Trinity’s main focus for the rest of the year will be on inventory management. Cohen said he plans to “significantly reduce” inventory and generate cash in the process. The ceo said he anticipates Trinity will be in a cash-positive position by the end of the year. Part of the reason for the high inventory, he explained, was strategic as the company decided to roll out fall merchandise early. The company also marked down older merchandise to get it off the racks — selling at 50 to 60 percent off.
Although Trinity has shuttered 18 stores so far this year in Greater China, Cohen said he expects the number of stores to stay fairly stable. The company also expects same-store sales will improve in Hong Kong, Macau and Taiwan and is “cautiously optimistic” about Trinity’s prospects in the U.S. and Europe. The company also has plans to launch operations in Singapore.
Trinity is a member of the privately held Fung Group.
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