PARIS — In further evidence that the Chinese market for luxury goods is losing a bit of its luster, men’s wear company Trinity Ltd. reported net profits rose 10.5 percent in the first half, versus a 63.5 percent jump during the same period last year, prompting it to reduce the pace of store openings for 2012.
The Hong Kong-based retailer of luxury men’s wear brands also said it had recently signed a licensing agreement for its Kent & Curwen brand with British Heritage Brands LLC, a joint venture between Li & Fung Ltd. and U.S. designer Tommy Hilfiger and his associates.
“Under this agreement, the group will be able to leverage Li & Fung Ltd.’s in-depth understanding of the United States and European markets along with Mr. Tommy Hilfiger’s expertise as a creative consultant to grow the Kent & Curwen brand in key markets around the world,” Trinity said.
Related Articles
Trinity belongs to Fung Retailing Ltd., a privately held entity of the Fung Group, which separately owns the publicly listed Li & Fung Ltd. In addition to Kent & Curwen, Trinity owns Gieves & Hawkes and Cerruti, and retails the D’Urban, Intermezzo and Salvatore Ferragamo brands in various Asian markets under licensing agreements.
You May Also Like
Trinity, which bought Gieves & Hawkes in May, said net profits rose to 265.3 million Hong Kong dollars, or $34.2 million, for the six months ended June 30. Sales rose 13.4 percent to 1.4 billion Hong Kong dollars, or $176.1 million.
All dollar rates are calculated at average exchange rates for the period in question.
“We are facing a situation which is very different from a year ago,” Trinity group managing director Sunny Wong told WWD.
“There’s not a lot of visibility for the future, so we are just assuming that probably the growth rate in the first half will be similar to the second half. It’s not very fact based, but what we find is that there are so far no strong signs of recovery,” he added.
Same-store sales rose by 5.9 percent in Mainland China and by 13.6 percent in Hong Kong and Macau, but they fell by 12.7 percent in Taiwan. Meanwhile, staff costs are rising and inventories are up, Trinity said.
Wong noted that even though Taiwan accounts for only 7 percent of Trinity’s total business, conditions there were affecting overall performance.
“Taiwan as a market is really suffering,” he said. “Taiwan is a department store market, and the department stores are all recording declines in sales. There is pretty rampant discounting, so this is something which dragged us back a bit.”
The group’s gross margin slid to 79.2 percent in the first half from 80.8 percent during the corresponding period last year.
It now expects to add 30 stores in 2012, compared with 50 in 2011, and will close certain stores that were not sufficiently productive. Wong said this compared with an earlier plan to add 40 stores to the network this year, adding that most of the extra closures would likely take place in second-, third- or fourth-tier cities.
“We are still very aggressive in opening lots of new shops because there are many opportunities, but at the same time we would look at closing more of the poorly performing shops, so we would have probably a 30-store net increase,” said Wong. “Despite the slowdown, there are lots of property projects still going on.”
Other cost-cutting measures included reducing inventory and putting a freeze on new hires and pay increases.
Nonetheless, Trinity intends to continue searching for acquisitions, in particular among European brands. Wong said Italian brands were on his wish list, but they were not necessarily for sale. At any rate, Trinity is in no hurry, he indicated.
“It’s a stretch on the management to acquire too many businesses at the same time, so we are looking forward to do an acquisition really for next year rather than this year,” he said.
Wong said Trinity was consolidating the U.K. and Hong Kong sourcing and design offices for Gieves & Hawkes following its acquisition. He added that the group was still in talks to renew its current licensing agreement with Salvatore Ferragamo when the deal expires at the end of the year, but no decision had been reached so far.
Meanwhile, Kent & Curwen is expected to hold showroom presentations in New York in January following its deal with British Heritage Brands, Wong said.
The executive said Hilfiger would be involved in developing the brand, which provided the uniforms for the Hong Kong delegates at the Olympic Games in London and last month staged a Royal Charity Polo Cup event attended by Prince Harry.
“[Hilfiger] is a shareholder of the joint venture, which holds the license. At the same time, he will be part-time helping a bit on the creative side. But I have to emphasize, this has nothing to do with the Tommy Hilfiger brand. This is Tommy Hilfiger, the person,” Wong said.
“He’s very committed to doing this, and he sees the Kent & Curwen brand as a perfect brand to get into the high-end market for the casualwear men’s side with a strong British heritage in the U.S. and also the U.K.,” he added.
A spokeswoman for Hilfiger said, “Mr. Tommy Hilfiger is one of several investors in, and provides limited consulting services to, Star Branding. Star Branding provides consulting services to British Heritage Brands. Mr. Hilfiger’s main business role continues to be with Tommy Hilfiger, and he only designs for his eponymous brand.”